Really Ready for Retirement?


  • Really Ready for Retirement?
  • The Next NAFTA

In the span of human history, retirement is a fairly new idea. Only a few generations ago, most of our ancestors could expect to work until the end of their lives. We are happy to report this is no longer the case. Improving longevity brings the opportunity for retirement, but also the responsibility for preparing. Unfortunately, many Americans have not handled this responsibility very well at all.

As recently as 1980, 46% of all private-sector workers were covered by a defined-benefit retirement plan (such as a pension). Today, that figure is 15%. As pension programs disappeared, many workers failed to compensate with their own savings. Younger workers know they are responsible for funding their own retirements—but all too often, they are not saving enough.

The U.S. Social Security Administration estimates that 36% of workers have not saved any money for retirement. For the bottom half of those who have saved, the median value of retirement savings is approximately $14,000. Retirement planners suggest that a worker earning the median annual income of $45,000 would need $31,500 per year in retirement, more than the entire value typically saved. Social Security will help, but not as much as many retirees may hope.

Segmenting consumers by age cohort reveals further concerns. While older workers have less time to save and should therefore have the most savings, their actual savings still leave much to be desired. And many workers currently in retirement live with the risks that they will outlive their savings or that increased medical costs will deplete their savings faster than planned. Medicare is vital, but it does not cover the full cost of insurance.