Among households that do have some savings, the typical amount is just
EDITOR'S NOTE — This is part of Divided America, AP's ongoing exploration of the economic, social and political divisions in American society.
One group doesn't have to worry as much: the richest 10 percent of households. They typically have more than
The rest of us look a lot more like
"I have to work and pray and hope my health continues to remain good so that I can continue to work," she says. "I still have a mortgage and all the insurance that goes along with that, and I have to pay payroll for my employees, which is really important to me. I can honestly say I'm frightened about the future."
Harvey isn't alone, as the gap widens between the few households who don't have to worry about a comfortable retirement and everyone else. The anxiety stretches not only across the country but also across political affiliations. Nearly equivalent percentages of
The looming crisis is the result of a system that's increasingly put workers in charge of saving for and managing their own retirement. Because the
"Only the privileged have access to a secure retirement," says
THE INCOME DIVIDE
It's much easier to save for retirement when you're making more money, and the vast majority of the income gains have gone only to the top in recent years.
The top 10 percent of
For middle-income Americans, meanwhile, incomes have only barely stayed ahead of inflation. The typical
The benefit of making more money goes beyond having more to save. Higher-income households also get a bigger after-tax benefit from putting money into a 401(k) or another tax-advantaged account, because their contributions would have been taxed at a higher rate than lower-income households'.
And with traditional pensions increasingly becoming extinct, it's grown even more important for Americans to save. Decades ago, workers could depend on getting a set, monthly check into their golden years. In 1979, 38 percent of private-sector workers were participating in a traditional pension plan.
In ensuing years, employers have shifted instead to the 401(k) and similar plans, where workers make their own contributions and handle the investments themselves. Such plans mean lower costs for employers.
By 2013, only 13 percent of private-sector workers were participating in a traditional pension, and most of those workers were participating in both a pension and a 401(k) or similar program. Nearly all employer-sponsored retirement plans — 94 percent — are 401(k)-style programs instead of traditional pensions.
It's a similar challenge for government pension systems around the world. Many countries have moved their retirement ages up to 67 from 65, and some are looking to move closer to 70, according to the
DEALING WITH UNEXPECTED SHOCKS
Financial shocks, such as a layoff, broken-down car or a divorce, happen to most of us. Six in 10 households experienced one over a 12-month period, according to a recent study by the
But when such shocks happen, lower-income households are less able to weather them without dipping into retirement savings or halting their contributions. Not only does that drain nest eggs, it also means people miss out on future gains their savings would have earned if they'd remained invested in the stock market.
"When you're out, you can't buy low" says
Harvey, the 54-year-old child-care center owner in
At one point, she had built up a nest egg of between
"Then, I unfortunately went through a divorce, and life happens," she says. She pulled cash from her retirement savings to help pay college tuition bills for her kids and for a car. All the while, even as her business grew, her take-home income remained low enough that she periodically lined up for a free turkey during holiday seasons.
"There's not a whole lot left," Harvey, a member of the
She did have a retirement account at one point, saving about
She's now barely getting by on the
"I can't save on
ACCESS TO PLANS
The death of the traditional pension means the burden is on us to save, and that's why access to 401(k) and other retirement plans is so important.
They did that by consistently putting away at least 10 percent of their income in a retirement plan. Harraway says they also didn't eat out much, didn't vacation lavishly and lived in
The couple didn't make much money early in their careers, but they recently were making enough to be in the top 10 percent.
Most lower-income households will also save when they have access to a retirement plan. The problem is that most don't get the opportunity.
Eighty percent of high-income working households have access to a 401(k) or similar defined-contribution plan, according to the
And it's not just lower-income workers who have less access to 401(k), 403(b) or similar programs. Small businesses are less likely to offer them than big companies. And small businesses accounted for 60 percent of all net new jobs created in the four years following the Great Recession, according to the
"Think about how people save," says
So, higher-income households not only make more money to save, they also have more opportunities to save.
The low retirement balances mean the majority of households — 52 percent — are at risk of having to cut their spending by more than 10 percent after entering retirement, according to the
"For an upper-middle class person, not being able to maintain their standard of living means fewer trips," says Munnell. "But for lower-income people, it can really mean depriving themselves."
In 1992, the percentage of
Because of their low savings and lack of a traditional pension, this group of Americans will rely mostly on
This group of workers has always existed, and they include many lower-educated and single Americans. But their ranks are growing, as a result of the widening retirement gap. "People who 20 or 30 years ago would have been in the middle, nowadays, they are much more likely to be in the bottom," Weller says.
To help close the gap in worker access to 401(k) and similar plans, states are trying their own measures.
Experts say they would prefer a broader fix from the federal government but call the state programs an encouraging step. It's natural for state and local governments to take the lead, because they're under more pressure.
"When the retirement crisis really hits, local and state government will be on the front lines," says Weller. "They provide some of the money, but they also provide the services."
In the meantime, many workers are simply working longer.
He and his wife have saved between
He says he's going to keep working, at least until February. Then, he'll consider cutting down to a few days per week or retiring.
And what would he look forward to in retirement? Trips? The beach?
"I would like to feel what it's like to wake up and not go to work," he says. "For a while, that's all I would like to do. I wouldn't worry about anything else."
AP Data Journalist