While the problem has been building for many years, a number of recent articles highlight the lack of retirement savings on the part of many Americans. Here are a couple of ominous statistics:
• Only 15% of workers are covered by traditional defined benefit plans. That forces individuals to save through defined contribution plans such as 401Ks.
• Yet, 20% of those over age 59 have no retirement account.
• 25% of all Americans have no retirement savings of any kind.
• As a result of inflation, 17% of Baby Boomers report they have been forced to reduce their retirement contributions and 5% are currently not contributing at all.
According to Vanguard, the average retirement account balance for those nearing retirement is $256,000. Since that total includes the balances of higher earners, a more meaningful figure is the median which is $90,000. Based on median household income, current Social Security payments, and the amount of retirement income recommended by financial planners, a portfolio balance at retirement of about $500,000 would be necessary to provide a reasonably comfortable retirement. This gap is so large that even strong market returns and increased savings are unlikely to close it. As a result of this gap, some will essentially never be able to retire and many will experience financial pressures during retirement.
Most of us have difficulty comprehending macro statistics. However, For whatever it is worth, the U.S. has a total retirement savings gap of about $7 trillion.