Americans Have Shortfalls with Retirement Savings

The Employee Benefit Research Institute published research findings that focused on retirement readiness. They sought to determine if most households were ready for retirement or if they would run out of money during that time. Their report expanded on prior analysis of the same topic.

EBRI’s report showed that people who were nearing retirement had savings deficits of nearly $20,000 per individual among married couples. For single women, the average deficit was over $60,000, and the average deficit for single males was more than $30,000. Although the RSS (Retirement Savings Shortfall) values may seem small, they reflect what may be decades of deficits. EBRI said that about half of the people were in an at-risk category.

Generation X participants had smaller RSS values because of more future eligibility time to participate in defined contribution plans. The simulated deficit values for that generation did not reflect future years of eligibility for defined contribution plans. For their generation, the average deficit was close to $80,000 per individual. Generation X members with less than 10 years of eligibility decreased to about $50,000, and those with less than 20 years had an estimated deficit of about $30,000. The average deficit for those with more than 20 years of eligibility decreased to slightly more than $15,000.

EBRI’s survey also showed the importance of long-term care costs and longevity risk in retirement planning. Ignoring these costs decreases the average RSS value by about 75 percent. Social Security retirement benefits are also impacted by RSS. This was shown in two different ways with EBRI’s research. There was a pro rata decrease of more than 20 percent shown to start in 2033. This would raise the RSS value by about 15 percent. If all benefits were removed in 2015, every generation’s average RSS value would increase drastically by an astounding 90 percent.

For all households in the United States where the leading earner was between the ages of 25 and 64, the aggregate deficit was about $4.13 trillion. When Social Security benefit reductions were estimated in a simulation to start in 2033, the aggregate deficit rose to $4.38 trillion. If Social Security benefits were instead assumed to be discontinued in 2015, the aggregate deficit rose dramatically to $7.87 trillion, which was an increase of nearly 90 percent. EBRI’s report highlights the importance of preparing for retirement and preparing as early as possible. To learn more about options, discuss concerns with an agent.

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