More than half of U.S. households of people 55 and older have no retirement savings in a defined contribution plan or IRA, and Social Security provides most of the retirement income for about half of households age 65 and older, according a new Government Accountability Office.
Furthermore, nearly 30 percent of the age 55+ households have neither retirement savings nor a traditional defined benefit (DB) pension plan. When limiting the households to ages 55 to 64, about 55 percent have less than $25,000 in retirement savings, including 41 percent with zero retirement savings.
Much of the GAO study is a comprehensive if sobering review of retirement savings trends identified not only in GAO’s own research but also from an abundance of other studies from government, academe and industry. It includes a chart of selected studies, plus commentary on various studies and surveys.
Many insurance and retirement professionals are likely aware of much of this research. InsuranceNewsNet has reported on many of the reports in recent years. Still, the GAO analysis is so all-inclusive that it may well serve as a compendium of current findings and/or as a refresher.
Seeing the plethora of findings in this context is also a reminder that retirement surveys do reach different conclusions, though often based on unique segments viewed by age, income, ownership and other factors. Despite the differences, it appears that retirement for some Americans will be challenging.
The GAO analysis does note that, although 52 percent age 55+ households have no retirement savings, 48 percent of those ages 55 to 64 do have some retirement savings.
Even here, however, the numbers reflect modest sums. The median amount of those savings is about $104,000 for households age 55-64 and $148,000 for households age 65-74, GAO said, noting that this is equivalent to an inflation-protected annuity of $310 and $649 per month, respectively.
Put another way, if looking at ages 55 on up, the median amount of retirement savings is approximately $109,000, GAO said. This is equivalent to an inflation-protected annuity of $405 a month for a 65-year-old, with income payments beginning immediately. GAO computed the income by using from the retirement income calculator at the Federal Thrift Savings Plan website.
Households with sizeable retirement savings are more likely than households with lower savings to have other resources such as income from a DB plan, the researcher added.
As for households age 75 and up, GAO said only 29 percent have retirement savings with the median being approximately $69,000. More than half (55 percent) do have a DB plan, but 35 percent have neither retirement savings nor a DB plan. Median income from the 75+ age group is $27,000 and median Social Security is about $17,000. GAO said 62 percent of these households rely on Social Security for more than 50 percent of their income.
The studies and surveys that GAO reviewed provide “mixed evidence” about the adequacy of retirement savings, the researchers said.
For instance, studies ranged widely in their conclusions about the degree to which Americans are likely to maintain their pre-retirement standard of living in retirement. That’s “largely because of different assumptions about how much income this goal requires,” according to the report.
Still, GAO said, the studies generally found about one-third to two-thirds of workers are “at risk” of falling short of this target.
InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].