Houston Estate Planning and Elder Law Attorney Blog
The big picture presented by the National Institute on Retirement Security is not a good one. Working Americans are completely unprepared for retirement.
The National Institute on Retirement Security is a non-profit research and educational organization that focuses on the development of public policies that help retirement security in America. A recent report using U.S. Census Bureau data looked at median retirement account balances for people ages 21 to 64.
Think Advisor’s recent article, “Most Americans Have $0 Saved for Retirement: NIRS” says that the report revealed that nearly 60% of all working-age individuals don’t have assets in a retirement account. That’s based on the Census Bureau’s Survey of Income and Program Participation data from the year 2014.
With 59.3% of people not owning a retirement account, a worker in the middle of the overall workforce would have a goose egg in retirement savings. The National Institute on Retirement Security report found that nearly about three-quarters of workers in the 21-to-34 age bracket, over half of those ages 35 to 44, half ages 45 to 54 and also about half in the 55-to-64 age range don’t have a retirement account.
The report included in its definition of retirement accounts employer-sponsored plans like 401(k)s, 403(b)s, 457(b)s, SEP IRAs and Simple IRAs, as well as private retirement accounts—such as traditional and Roth IRAs. In the report’s analysis, an individual was deemed to own a retirement account, if her total retirement account assets were more than zero. There’s a significant gap between older and younger folks in retirement account ownership, and the report found that that this gap is much wider across income groups.
“Individuals with retirement accounts have a higher median income of $51,024, compared to $17,004 among individuals without retirement accounts—three times as large,” the report states.
The research also showed that the median account balances were insufficient, even among individuals with retirement accounts. In fact, for those approaching retirement (age 55 to 64) with retirement accounts, the average balance was $88,000. The report suggested this amount would only provide a “few hundred dollars per month in income if the full account balance is annuitized, or if an individual follows the traditionally recommended strategy of withdrawing 4% of the account balance per year (this amounts to less than $300 per month).”
Digging into the details presents an even more worrisome scenario. A look at working individuals age 21 to 64 who had any retirement savings found that 22% of them had saved less than a year’s income. And among those closest to retirement—ages 55 to 64—only 17% of those who had retirement savings had a year’s worth of income.
Regardless of your age, anyone who is working should be saving something for retirement, even if it is a small amount from every paycheck. The younger you are, the more important it is to start early. For older Americans, the savings target is far more daunting, but saving something is still better than nothing.
Reference: Think Advisor (September 18, 2018) “Most Americans Have $0 Saved for Retirement: NIRS”