Surveys suggest retirement in US a 2-tiered system

Are Americans prepared for retirement? It depends onwhomyou ask. The Alliance for Lifetime Income released a study with an eye-catching headline: Two-thirds of peak baby boomers are not financially prepared for retirement.

However, results ofEBRI’s 2024Retirement Confidence Survey found that "two-thirds of theworkers and threefourths of the retirees are very or somewhat confident about having enough money to live comfortably in retirement."

Two retirement surveys, two different results?

Not so fast. The ALI survey crunches retirement numbers whileEBRI asks how we feel about our retirement readiness, and there can be a chasm between the two.

ALI focused on "peak boomers," defined as those Americanswhowill turn 65 between 2024 and 2030. According to the study, more than half of these soonto-be retirees will rely primarily on Social Security for income, whichwas intended to replace about40% of annual pre-retirement earnings.

ALIwent deeper to determine if assets accumulated (the median retirement savings for peak boomers is $225,000) would augment Social Security and last up to 20 or more years in retirement. The answer is that two-thirds of peak boomers "will be challenged to maintain their lifestyles in retirement."

Conversely, theRCSasked people how confident they felt in their ability to live comfortably throughout their retirement. While68% may feel confident, only about half have run the numbers. If they did, the results might be similar to ALI because "a sizable percentage ofworkers say they have very little or no money in savings and investments."

Forty-seven percent report that the total value of their savings and investments, excluding the value of their primary home, is less than $100,000. (RCS relies onworkers to self-report, EBRI relies on Federal Reserve data.)

Ultimately, the two surveys may be closer than their headlineswould indicate. Economist and authorTeresa Ghilarducci, in"Work, Retire, Repeat: TheUncertainty ofRetirement in theNewEconomy," dives into the numbers and finds a two-tiered retirement system, where only "21% of Americans aged 62-70 have enough money to maintain their standard of living in retirement." Of the 79%, "51% are retired but can’t maintain their pre-retirement standard of living. And the rest, 28%, areworking and cannot afford to retire."

Ghilarducci says "most retirees lament retiring earlier than planned because they were laid off, forced out, or their health or their spouse’s health drove them out of the labor force."

I have spoken tomany of these folks and have found that theywere not spendthrifts butwere often unlucky and had to find lower-paying jobs to meet their obligations.

For those facing a shaky retirement, getting the most out of the Social Security system should be a priority. Although you can claim benefits as early as age 62, doing so will permanently reduce your income for the rest of your life. Instead, people should try towait until full retirement age, which for anyone born after 1960 is 67, or until age 70, when benefitsmaxout.

Doing so allows you to get Delayed Retirement Credits, which increases benefits by8% a year. Ghilarducci says these credits are "the best financial deal on the planet… waiting to claim fromage 62 to 70 raises one’s monthly lifetime benefits by more than 30%." Jill Schlesinger, CFP, is a CBSNews business analyst. Aformer options trader and CIO of an investment advisory firm, she welcomes comments and questions at [email protected]. Check her website atwww.jillonmoney.com.

Jill Schlesinger

Jill onMoney