Experts have long warned that the United States is headed for a retirement crisis. New research shows just how dire that crisis could be.
The problem is not just that Americans aren't saving enough for retirement. More than one-quarter of them have no retirement savings at all, according to a new study by the personal finance website GoBankingRates.
The study surveyed more than 1,000 U.S. adults about their long-term savings, and the results were alarming: 28% had absolutely nothing saved for retirement. Not surprisingly, 30% doubted they'd ever be able to retire.
It's a predicament that many financial advisers are all too familiar with.
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"When individuals find themselves inadequately prepared for retirement, they confront limited options," said Ashley Folkes, founder of Inspired Wealth Solutions in Birmingham, Alabama. "They can opt to curtail spending and boost savings, postpone retirement, adjust to a simpler lifestyle or die early. People usually don't like those choices."
This lack of retirement readiness varied by age group. At the high end, 35% of Americans aged 35 to 44 had zero long-term savings; 33% of those aged 45 to 54 had the same problem.
Taken together, those age groups largely cover Generation X, which was born between 1965 and 1980. Multiple studies have shown that Gen Xers, who came of age during the transition from pensions to 401(k)s, have struggled to save enough for retirement. A survey by the insurance firm Prudential found that 82% of Gen Xers are not confident they'll ever be able to fully retire.
But this was far from the only generation to fall behind. Twenty-eight percent of Americans aged 18 to 24 had nothing in their nest eggs, as did 25% of 55-to-64-year-olds.
How could so many people have no long-term savings? One answer is that a shocking 39% of Americans aren't contributing to a retirement plan, according to the study. This, too, varied by age — 43% of adults aged 35 to 44 had never put money in a retirement account, compared to 24% of those aged 18 to 24.
Access to retirement plans like 401(k)s is uneven in the American economy, because not all employers provide them. According to the Bureau of Labor Statistics, only 73% of U.S. workers have access to a workplace retirement plan, and only 56% actually use them.
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But there are also other reasons why so many American piggy banks are empty. Wealth managers who have encountered this problem point to a number of cultural and economic maladies.
"The high cost of living is responsible for a lack of retirement savings," said Noah Damsky, a principal at Marina Wealth Advisors in Los Angeles. "Real wages have not kept up with costs."
Others find that clients have other, more urgent bills to pay off.
"I see this all the time in doing pro bono work," said Jonathan Swanburg, president of TSA Wealth Management in Houston, Texas. "Most often the person hasn't saved because all their extra money was going toward credit card debt. Any time they get close to being out of credit card debt, a new emergency pops up where they are right back in it."
In addition, some believe American culture encourages spending more than saving.
"Our society thrives on instant gratification, bombarding us from all angles," Folkes said. "This phenomenon often leads to lifestyle inflation, where our spending escalates in tandem with our earnings, resulting in a higher standard of living but insufficient savings."
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Breaking that habit requires building better ones. Fortunately, that's something advisers can help with.
"The solution has to start with budgeting," Swanburg said. "Once the person can get out of debt and build up an emergency reserve, then they can start saving for the long-term. And by getting their budget in order, they will likely have reduced their expenses where they don't need as much to one day retire."
This article originally appeared in Financial Planning.
FAQs
How could so many people have no long-term savings? One answer is that a shocking 39% of Americans aren't contributing to a retirement plan, according to the study. This, too, varied by age — 43% of adults aged 35 to 44 had never put money in a retirement account, compared to 24% of those aged 18 to 24.
What percentage of Americans have no retirement savings? ›
WASHINGTON—A new AARP survey finds that 20% of adults ages 50+ have no retirement savings, and more than half (61%) are worried they will not have enough money to support them in retirement.
Do most Americans have enough money saved for retirement? ›
But most people are far from reaching that objective, with the study finding that the average amount held in a retirement account today is just $88,400. That means that the typical worker has a $1.37 million gap between their actual savings and their retirement aspirations.
Do 1 in 3 Americans have less than $5000 saved for retirement? ›
According to a 2018 Northwestern Mutual study, 1 in 3 Americans have less than $5,000 saved for retirement, while 21 percent of Americans have no retirement savings at all.
What percentage of Americans can afford to retire? ›
Only about 10% of Americans between the ages of 62 and 70 are both retired and financially stable, Teresa Ghilarducci, a professor at The New School for Social Research in New York and a retirement expert, recently told CBS MoneyWatch.
How much does the average 70 year old have in savings? ›
The Federal Reserve also measures median and mean (average) savings across other types of financial assets. According to the data, the average 70-year-old has approximately: $60,000 in transaction accounts (including checking and savings) $127,000 in certificate of deposit (CD) accounts.
How much does the top 10 percent have in retirement savings? ›
The top 10% of American households by net worth had an average of $1.29 million in their retirement accounts in 2022, according to the Federal Reserve's Survey of Consumer Finances. This is almost four times the average retirement savings for all American families that year.
Why are Americans not saving for retirement? ›
Another big part of the problem when it comes to saving for retirement is that savings plans are not universally available in the U.S. Almost half of private sector employees ages 18 to 64, or 57 million Americans, do not have the option to save for retirement at work.
Can I retire at 65 with no savings? ›
You can still live a fulfilling life as a retiree with little to no savings. It just may look different than you originally planned. With a little pre-planning, relying on Social Security income and making lifestyle modifications—you may be able to meet your retirement needs.
How to retire at 60 with no money? ›
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
“By the time you're 40, you should have three times your annual salary saved. Based on the median income for Americans in this age bracket, $100K between 25-30 years old is pretty good; but you would need to increase your savings to reach your age 40 benchmark.”
Can I retire at 65 with 500k? ›
The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.
Is 100K enough to retire? ›
“With a nest egg of $100,000, that would only cover two years of expenses without considering any additional income sources like Social Security,” Ross explained. “So, while it's not impossible, it would likely require a very frugal lifestyle and additional income streams to be comfortable.”
What is the average 401k balance at age 65? ›
How long will 1 million in 401k last? ›
How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
How many Americans don't have a retirement fund? ›
Almost half of Americans don't have a dedicated retirement savings account, according to the Federal Reserve's 2022 Survey of Consumer Finances. The survey, which includes the latest government data, reveals only 54.4% of American families reported having dedicated retirement accounts such as a 401(k) or IRA.
What happens to people with no retirement savings? ›
You may have to rely on Social Security
Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit.
How many people in the US do not have a retirement plan? ›
About 69 million workers, or 56% of the nation's workforce, lack access to a retirement plan through their workplace, the Economic Innovation Group found in its analysis of 2021 Census data.
How many Americans have $1,000,000 in retirement savings? ›
However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.
