The U.S. is facing a looming retirement crisis because a huge swath of Baby Boomers and Generation X-ers have saved little to nothing for their golden years, according to detailed analyses of generational savings habits.
The Insured Retirement Institute found that only 23 percent of the Baby Boomer generation and 24 percent of Gen X-ers are confident their savings will last throughout their retirement years.
Small wonder, as more than 40 percent of Boomers and over 30 percent of Gen Xers report having no retirement savings whatsoever.
{mosads}That’s a bonafide crisis, especially for Boomers, because they have less time to correct the deficit. Census Bureau estimates show that 78 million Baby Boomers – born between 1946 and 1964 – are now approaching retirement. Gen X includes people born between 1965 and 1978 and totals approximately 65 million.
But even among Boomers and Gen X-ers who do have retirement savings, most do not have enough. Of those with savings, only 47 percent of Boomers and 27 percent of Gen X-ers have saved $150,000 or more. With only 25 percent expecting income from an employer-provided pension in addition to Social Security, these are very low levels of savings.
Increased longevity is exacerbating the crisis. Retirement may last 25 or 30 years, or even longer, with actuarial projections showing that many will live to age 95.
A separate IRI analysis finds that poor saving habits are also dogging the next major demographic group, the so-called Millennial generation of people born between 1982 and 2000.
While 68 percent of Millennials are passively contributing to a retirement savings plan, a positive sign, the research found that only 29 percent are proactively planning for retirement with a savings goal in mind.
IRI’s generational research studies were conducted by third-party research firms and included the opinions of at least 800 Americans in each cohort. They were released between 2015 and 2017.
In addition to the broad challenges confronting all members of these generations, women face a unique set of circumstances and additional challenges when it comes to saving for retirement.
According to the Social Security Administration, women spend an average of 12 years out of the workforce during their careers because of their roles as caregivers for both children and parents.
That means 12 fewer years working toward Social Security benefits and contributing to defined contribution plans. And for those relative few who are fortunate enough to have an employer-provided defined benefit plan, 12 fewer years earning pension credits.
At the same time, women live an average of five years longer than men, requiring retirement income to last even longer. Because of longer life spans, women may also have higher medical bills and long-term care expenses due to the infirmities that can accompany advanced age.
Taken together, the alarming statistics clearly demonstrate that the U.S. will contend with serious retirement security challenges in the very near future. In response, public policy initiatives must expand access to opportunities for accumulating adequate retirement savings. They must help Americans start to plan for retirement as soon as they enter the workforce.
There are several common sense actions that Congress and the Trump administration can take. These include:
· Maintaining tax-deferred treatment for retirement savings to help workers prepare for a secure retirement.
· An expansion of access to workplace retirement plans so that workers may save and prepare for their retirement years.
· Expanding automatic enrollment and escalation of contribution features in retirement plans and increasing access to lifetime income that cannot be outlived.
· The inclusion of lifetime income estimates on employee’s benefit statement.
While our retirement security challenges cannot be solved overnight, proper planning and professional guidance is critical to reversing these troubling trends and setting the right course for current and future generations.
Cathy Weatherford is President and CEO of the Washington, D.C.-based Insured Retirement Institute and author of “Women and Wealth: Inspiring Stories from Real Women on the Path to Financial Success,” published in January.
The views expressed by contributors are their own and are not the views of The Hill.