Financial Insecurity is Trending
The U.S. retirement system, and the workers and retirees it was designed to help, face major challenges. Pensions are becoming less common, and individuals are increasingly responsible for planning and managing their own retirement savings accounts, like 401(k)s. For an increasing number of Americans, it is getting harder to figure out how to save enough for a comfortable living in retirement. About half of households age 55 and older have no retirement savings. About one-third to two-thirds of workers are at risk of not being able to maintain their standard of living in retirement.
Our 2017 report on the Nation’s Retirement System examines these challenges drawing in part from prior work and from a panel of retirement experts, and discusses how to better ensure a secure and adequate retirement, with dignity, for all.
Real-World Challenges to Planning and Managing Retirement Income
Combining retirement savings, Social Security, and other sources of retirement income may look good on paper, but in the real world, it isn’t easy.
Here’s an overview of some of the trends and factors contributing to these challenges.
Video: Retirement Security Challenges
A look at challenges facing American retirement security, including shifts in employer plans, financial challenges for Social Security, and low individual savings levels.
Key Pillars of the Current Retirement System Face Financial Risks
The three main pillars of the current retirement system are facing a number of risks.
- Social Security’s retirement program (Old-Age and Survivors Insurance): The program is projected to be unable to pay full benefits beginning in 2035. As Social Security spending grows, long-term fiscal projections show that the federal government is on an unsustainable fiscal path.
- Private employer-sponsored plans:
- Defined benefit (pension) plans: These plans are on the decline and facing concerns about the solvency of the federal programs that insure them through the Pension Benefit Guaranty Corporation. At the end of 2016, the Pension Benefit Guaranty Corporation’s net accumulated financial deficit was over $79 billion.
- Defined contribution (savings) plans: These plans are on the rise, but place the responsibility to save and invest on the individual.
- Individual savings: Outside of employer-sponsored plans, individuals’ retirement savings are often low or nonexistent, which may increase reliance on various federal and state safety net programs in the future. As the size of the older population grows so will the need for long-term services and supports.
Timeline of Projected Fiscal Risks
The Big Picture for Older Americans
Over the past 40 years, there have been fundamental changes that affect the 3 pillars of the U.S. retirement system: Social Security, employer-sponsored pensions or retirement savings plans, and individual savings. These changes have made it increasingly difficult for individuals to plan and manage their retirements effectively.
Explore our Retirement Security collection for the big picture:
As the population ages and labor force growth slows, Social Security programs are being stretched to the limit. Over the long term, there’s a projected gap between how much Social Security costs and how much money will be available to cover those costs.
Health Care Financing for Retirees
Medicare, Medicaid, and other health care plans all play a role in affording health care in retirement. Many older Americans will also have additional long term care needs. We discuss the roles these programs play and why Medicare and Medicaid are High Risk programs.
Related Retirement Challenges
We’ve also reported on related retirement challenges. Personal debt, housing, and the availability of services that allow people to age in place are all issues that affect retirement security. We discuss these and other related challenges for older adults.