Facts of the Day

10% is the share of pre-retirement earnings that households approaching retirement in 2007 could replace with their retirement savings.

In 2007, near the peak of the stock market, half of households approaching retirement (ages 55-64) had less than $98,000 in a retirement savings account, if they had an account (the median for all households was much lower). This would be enough to purchase a joint and survivor annuity worth $5,400 a year, replacing just 10 percent of these households’ median income.

Sources:

Bucks, Brian K.; Kennickell, Arthur B.; Mack, Traci L. and Moore, Kevin B. “Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances.”  Federal Reserve Board, February 2009, pp. A5, A19.

Monique Morrissey, “Toward a universal, secure, and adequate retirement system,” Retirement USA Conference Report, Economic Policy Institute, October 21, 2009, p. 18.

Half of older households with personal savings and investments receive less than $1,542 a year in income from these assets.

The median amount of asset income for households where either the householder or spouse was aged 65 or older was $1,542 for those households who received any asset income.  In 2008 59 percent of older households had income from assets.  Asset income includes interest from savings accounts, Individual Retirement Accounts, Keogh plans, rents, dividends and royalties.  Income from assets does not include savings held in retirement savings accounts or other accounts that are cashed out as lump sum payments. 

The amount of income from assets varied according to the total household income.  For the 27 percent of households with income less than $10,000 in 2008, the median asset income was $199.  Older households with income greater than $50,000 (78 percent) had a median income from assets of $5,508.

Among individuals 65 or older, 54 percent had income from savings, investments, and other financial assets in 2008. The median amount of yearly asset income was $1,054.  Low-income persons were less likely than higher income persons to have income from assets.  Only 36% of persons with annual income below $10,000 had income from assets and the median amount of asset income was $225.  Among persons with income above $50,000, 81% had asset income and the median amount of asset income was $7,313.

Source:  Patrick Purcell, “Income and Poverty Among Older Americans in 2008,” Congressional Research Service, October 2, 2009, Tables 5 & 6.

2 in 5 older American households have retirement savings accounts.

In 2007, 41 percent of households with a household head age 65 or older had one or more retirement savings accounts. Retirement savings accounts include 401(k)-type retirement plans, Individual Retirement Accounts and Keogh plans.  If one member of a household had a retirement savings account the household is counted.  Household members may also have income from a pension or annuity.

Among households with retirement savings accounts, half had less than $60,800 in their combined retirement savings accounts in 2007, before the fall of the stock market in 2008-2009. The amounts in these accounts must be parceled over the lifetime of the householder and the lifetime of his or her spouse.

Source:  Patrick Purcell, “Retirement Savings and Household Wealth in 2007,” Table 5, Congressional Research Service, April 8, 2009.

2 in 5 older American households have income from pensions.

Among households with a householder aged 65 or older in 2008, only 41 percent had income from pensions or annuities.  If one member of a household had income from a pensions (or an annuity) the household was included in this figure.  Also, one or more household members may have both a retirement savings account and a pension.  Similarly, household members may have more than one pension or retirement savings account.

The median income for older households with Social Security and pension and annuity income was $32,105 in 2008, not including earnings from work.  These figures include pension income from government plans. The median income is slightly lower without income from government plans.  For older households with income from Social Security and private pensions, the median income without earnings was $30,279 in 2008.

Source: Social Security Administration, “Income of the Population 55 or Older, 2008,” April, 2010, Tables 2.A1, 3.A5.

55% of people 65 or older rely on Social Security for half or more of their income.

As the share of workers covered by secure pensions has shrunk, Social Security is more important than ever to Americans’ retirement security. More than half (54.8 percent) of people age 65 or older receive half or more of their income from Social Security, and 15.4 percent have no other source of income.

Source: Social Security Administration, “Income of the Population 55 or Older, 2008,” April 2010, Table 9.B1.  

Nine in ten 18-29 year olds say Social Security is an important program.

Young workers believe Social Security is important, but are skeptical that it will be there when they retire. According to an AARP survey, among 18-29 year olds,

  • 90 percent say Social Security is an important government program
  • 82 percent agree that even if they could do better on their own, it is important to contribute to Social Security for the common good
  • 74 percent agree that even if they may not need Social Security when they retire, they want to know it is there “just in case”
  • 68 percent oppose cutting benefits as a way to help reduce the federal deficit
  • 33 percent are confident in the future of Social Security

Source: Colette Thayer, “Social Security 75th Anniversary Survey Report: Public Opinion Trends,” AARP, Research and Strategic Analysis, August 2010, pp. 6, 11, 16, 18, and 19.

67 is the Social Security “Normal Retirement Age” for workers born 1960 and later.

Social Security’s normal retirement age (NRA)—the age at which a worker can receive Social Security benefits that are not reduced for early retirement—is scheduled to gradually increase from 65 for workers born before 1938, to 67 for workers born 1960 and later. This is the same as a 13 percent cut in benefits for workers retiring at 65, since this does not necessarily change when workers retire (in fact, most retire before age 65).

Source: “Effect of Early or Delayed Retirement on Retirement Benefits,” Office of the Chief Actuary, Social Security Administration.

28 percent is the share of pre-retirement income that Social Security benefits will replace in 2030.

An average earner who retired at 65 in 2002 received net benefits equal to 39 percent of pre-retirement income. By 2030, the replacement rate will have declined to 28 percent due to a scheduled increase in the Social Security Normal Retirement Age (NRA), higher Medicare deductions, and income taxes levied on Social Security benefits. The NRA, also referred to as the full retirement age, is the age at which a worker can receive Social Security benefits that are not reduced for early retirement.

Source: Alicia H. Munnell, Anthony Webb and Francesca Golub-Sass, “The National Retirement Risk Index: After the Crash,” Figure 4, Center for Retirement Research, Number 9-22, October 2009, p. 2.  

One in five private-sector workers is covered by a traditional pension.

The share of private-sector workers participating in traditional “defined benefit” pensions has declined by half, from 39 percent in 1980 to 20 percent in 2007. This shift has been driven by employers, not workers, since surveys show that Americans prefer traditional pensions over 401(k)-style plans. For example, fewer than one third (29 percent) of respondents to a survey by the National Institute on Retirement Security said the current system of 401(k) accounts was better than that of earlier generations, which relied more on employer-provided pensions. Half (51 percent) said the current 401(k) system was worse.

Sources:

Brendan Cushing-Daniels and Richard W. Johnson, “Employer-Sponsored Pensions: A Primer,”  The Retirement Policy Project, Urban Institute, Income and Benefits Policy Center, January 2008, p. 3. 

“Pensions & Retirement Security: A Roadmap for Policy Makers: A Report on the American Public’s Views on Pensions and Retirement Security,” National Institute on Retirement Security and Matthew Greenwald & Associates Inc., January 14, 2009, p. 13.

-8 percent is the change since 2000 in the share of workers whose employer sponsors a retirement plan.

The share of workers whose employer sponsors a retirement plan declined from 61.4 percent in 2000 to 53.2 percent in 2008, according to a Congressional Research Service (CRS) analysis of U.S. Census Bureau data. The share of workers participating in a plan also declined over this period from 50.3 percent to 43.6 percent. Declines were more pronounced among workers under 55 than among older workers.

An employer survey, the Bureau of Labor Statistics’ National Compensation Survey, shows flat rather than declining coverage. One reason for the discrepancy between the two government surveys appears to be the ambiguous status of workers enrolled in “frozen” pension plans who are no longer accruing benefits. According to Pension Benefit Guaranty Corporation data cited by CRS, 8 percent of workers enrolled in a traditional “defined benefit” pension are no longer accruing benefits.

Source: Patrick Purcell, “Pension Sponsorship and Participation: Summary of Recent Trends,” Congressional Research Service, September 11, 2009, pp.  4, 6, 13-15.  

43 percent of full-time workers ages 25-34 participated in a retirement plan 2008.

In 2008, 43.3 percent of full-time workers ages 25-34 participated in a retirement plan, compared to 54.0 percent of full-time workers ages 35-64, according to U.S. Census Bureau data. Though younger workers have always been less likely to participate, it does not bode well for younger workers that participation appears to have declined in recent years, according to this measure. In 2000, for example, half (49.9 percent) of full-time workers ages 25-34 participated in a plan.

Source: Patrick Purcell, “Pension Sponsorship and Participation: Summary of Recent Trends,” Congressional Research Service, September 11, 2009, p. 10.

56 percent of Gen X households are at risk of being unable to maintain their standard of living in retirement.

Younger generations are increasingly at risk of seeing a sharp drop in living standards at retirement, the first such reversal in modern U.S. history. Thus, more than half (56 percent) of Gen X households are estimated to be at risk, according the National Retirement Risk Index (NRRI) developed by the Center for Retirement Research at Boston College. This compares with 41 percent of early Baby Boomers and 48 percent of late Boomers. Overall, 51 percent of households were at risk in 2009, up from 31 percent in 1983.

The NRRI was developed by the Center for Retirement Research at Boston College. The index uses data from the Federal Reserve Board’s 2007 Survey of Consumer Finances and includes public sector workers. The latest SCF data is from 2007 but was updated to mid-2009. The NRRI is derived by comparing households’ projected replacement rates – retirement income as a percent of pre-retirement income – with target rates that would allow them to maintain their standard of living in retirement. Households are considered “at risk” if they are more than 10 percent below their target.

The measure assumes that people will continue to work, save, and accumulate pension and Social Security benefits until they retire at age 65. For example, it assumes that retirement savings will grow at a rate similar to that observed for previous generations, even though current savings levels may be lower or higher (which is why the NRRI changes over time). The figure assumes that Social Security benefits will not be cut; that employers will not freeze existing pensions; that savings are fully annuitized at retirement; and that home equity is withdrawn through reverse mortgages.

Source: Alicia H. Munnell, Anthony Webb and Francesca Golub-Sass, “The National Retirement Risk Index: After the Crash,” Figure 4, Center for Retirement Research, Number 9-22, October 2009, p. 4. 

39 percent of nonwhite or Hispanic families have a retirement savings account.

In 2007, 39 percent of nonwhite or Hispanic families had a 401(k), IRA or other retirement savings account, compared to 58 percent of white non-Hispanic families. The median account balance for these families was also lower ($52,700 versus $25,400 in 2007), though this is misleading because it includes only families with retirement accounts. Since the majority of nonwhite or Hispanic families do not have an account, the median account balance for all these families is $0. (These figures are from the Federal Reserve Board’s 2007 Survey of Consumer Finances and likely overstate current account balances. Because of the relatively small sample size, the Federal Reserve does not publish separate summary statistics for African-American and Hispanic families.)

It is important to keep in mind that the lower participation and savings of African-American and Hispanic workers primarily reflects the different circumstances these workers face rather than different decisions they make. According to research by the Center for Retirement Research at Boston College, “for comparably situated individuals, African Americans, Whites, and Hispanics respond in a similar fashion in terms of joining a 401(k) plan and deciding how much to contribute.”

Sources:

Bucks, Brian K.; Kennickell, Arthur B.; Mack, Traci L. and Moore, Kevin B. “Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances.”  Federal Reserve Board, February 2009, p. A18, A19.

Alicia H. Munnell and Christopher Sullivan, “401(k) Plans and Race,” Center for Retirement Research, Number 9-24, November 2009.

46 percent of full-time African American workers participate in a retirement plan at work.

Fewer than half (45.6 percent) of full-time African-American workers ages 25 to 64 participated in a retirement plan in 2008, roughly four-fifths the rate of white non-Hispanic workers (56.6 percent). A major reason is that the typical full-time African American worker earned less than the typical full-time white non-Hispanic worker ($31,091versus $41,011 in 2008), and lower-income workers are less likely to be covered. However, according to an analysis of U.S. Census Bureau data by the Employee Benefit Research Institute, African-American workers are less likely to be covered at any given pay level than white workers.

Sources:

Patrick Purcell, “Pension Sponsorship and Participation: Summary of Recent Trends,” Congressional Research Service, September 11, 2009, p. 11.

Census Bureau, Current Population Survey, March 2009, PINC-05, Part 4.

Census Bureau, Current Population Survey, March 2009, PINC-05, Part 6.

Craig Copeland, “Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2008,” Employee Benefits Research Institute, Issue Brief No. 336, November 2009, p. 13.

Only 4 out of 30 OECD countries have higher elderly poverty rates than the United States.

This is according to a relative measure that compares the income of older people to the median income in each country. Using international benchmarks, the U.S. has the fifth highest elderly poverty rate among the 30 countries who are members of the Organisation for Economic Co-operation and Development. The OECD’s poverty threshold is 50 percent of a country’s median income.

The OECD also compares the average income replaced by each country’s social security and mandatory pension systems. The average income replacement rate from Social Security in the U.S. is 39 percent. This is much less than the average 59 percent replacement rate in all 30 OECD countries. The United States ranks 25th out of 30 OECD countries by this measure.

Source: Organisation for Economic Co-operation and Development, Pensions at a Glance 2009: Retirement-Income Systems in OECD Countries, June 2009, pp. 64 and 117.

3 in 10 full-time Hispanic workers participate in a retirement plan at work.

Fewer than one-third (30.3 percent) of full-time Hispanic workers ages 25 to 64 participated in a retirement plan in 2008, roughly half the rate of white non-Hispanic workers (56.6 percent). A major reason is that the typical full-time Hispanic worker earned one-third less than the typical full-time white non-Hispanic worker ($26,445 versus $41,011 in 2008) and lower-income workers are less likely to be covered. However, according to an analysis of U.S. Census Bureau data by the Employee Benefit Research Institute, Hispanics are less likely to be covered at any given pay level than white workers.

Sources:

Patrick Purcell, “Pension Sponsorship and Participation: Summary of Recent Trends,” Congressional Research Service, September 11, 2009, p. 11.

Census Bureau, Current Population Survey, March 2009, PINC-05, Part 4.

Census Bureau, Current Population Survey, March 2009, PINC-05, Part 9.

Craig Copeland, “Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2008,” Employee Benefits Research Institute, Issue Brief No. 336, November 2009, p. 13.

1 in 5 African-American and Hispanic seniors live below the federal poverty line.

In 2009, the poverty rate for African Americans and Hispanics age 65 and older was 19.5 percent and 18.3 percent respectively, compared to 7.5 percent for older whites. The federal poverty threshold is very low – $10,326 for single persons 65 years and older in 2009 – well below what many experts view as necessary to meet basic needs.

Source:  Census Bureau, Current Population Survey, March 2009, Table POV01.

Half of Hispanics age 65 and older have a yearly income of less than $12,181.

The median income of older Hispanics was $12,181 in 2009, compared to $20,462 for older non-Hispanic whites and $14,620 for older African Americans. The estimated income older Americans need to meet basic needs, depending on homeowner status, is between $16,105 and $20,795, according to the Elder Economic Security Standard™ Index developed by Wider Opportunities for Women (WOW) and the Gerontology Institute at the University of Massachusetts Boston (the 2006 index was converted to 2008 dollars).

Sources:

Census Bureau, Current Population Survey, March 2009, Table POV01.

“Elder Economic Security Standard Index Frequently Asked Questions,” Wider Opportunities for Women, Gerontology Institute at University of Massachusetts Boston.

Consumer Price Index Inflation Calculator, Bureau of Labor Statistics.

Half of African Americans age 65 and older have a yearly income of less than $14,620.

The median income of older African Americans was $14,620 in 2009, compared to $20,462 for older non-Hispanic whites.

The estimated income older Americans need to meet basic needs, depending on homeowner status, is between $16,105 and $20,795, according to the Elder Economic Security Standard™ Index developed by Wider Opportunities for Women (WOW) and the Gerontology Institute at the University of Massachusetts Boston (the 2006 index was converted to 2009 dollars).

Sources:

Census Bureau, Current Population Survey, March 2009, Table POV01. 

“Elder Economic Security Standard Index Frequently Asked Questions,” Wider Opportunities for Women, Gerontology Institute at University of Massachusetts Boston.

Consumer Price Index Inflation Calculator, Bureau of Labor Statistics.

The ratio of women’s to men’s earnings is 77 cents on the dollar.

Women would be much better prepared for retirement if they earned as much as men. According to an analysis of U.S. Census Bureau data by the Employee Benefit Research Institute, at any given pay level, women are more likely to participate in a retirement plan than men. A major reason they do not have a higher participation rate overall is that they typically earn less than men: 77 cents on the dollar for full-time workers in 2008, according to the U.S. Census Bureau.

After years of lagging behind, women are now only slightly less likely than men to participate in a retirement plan: 51.0 percent versus 51.2 percent for full-time private-sector workers ages 25 to 64 in 2008, according to an analysis of Census Bureau data by the Congressional Research Service. While the participation rates of both men and women appear to have declined since 2000, the participation rate of men seems to have declined faster so the two rates have converged.

Sources:

“Income, Poverty, and Health Insurance Coverage in the United States: 2008,” Census Bureau, Current Population Reports, September 2009, Table A-2.

Craig Copeland, “Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2008,” Employee Benefits Research Institute, Issue Brief No. 336, November 2009, pp. 9, 13, 29.

Purcell, Patrick. “Pension Sponsorship and Participation: Summary of Recent Trends.” Congressional Research Service, September 11, 2009, pp. 9, 13.

A woman who reached age 65 in 2010 can expect to live another 20.4 years.

According to the Social Security Administration, women who reach age 65 in 2010 can expect to live another 20.4 years in retirement, compared to 18.1 years for men. This means that women need more retirement savings than men unless they are covered by a pension that provides sufficient lifetime income. Unfortunately, older women are less likely to have income from pensions. Whereas 46.9 percent of men age 65 or older received some sort of retirement benefit besides Social Security in 2008, only 41.9 percent of women received a retirement benefit, whether directly or through a spouse.

Sources:

“2010 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds,” August 9, 2010, Table V.A4.

Social Security Administration, “Income of the Population 55 or Older, 2008,” April 2010, Table 2.B1.

58% of older women rely on Social Security for more than half of their incomes.

Nearly six in ten (58.3 percent) of women age 65 or older receiving Social Security benefits relied on these benefits for half or more of their income in 2008, compared to just over half (50.3 percent) of older male beneficiaries. Older African-American and Hispanic women are especially reliant on Social Security, with almost three in ten (29.2 percent and 28.0 percent respectively) having no other source of income in retirement, almost double the share of white women (16.6 percent). These statistics are from the Social Security Administration.

Source: Social Security Administration, “Income of the Population 55 or Older, 2008,” April 2010, Tables 9.B1, 9B4. 

17% of older unmarried women live below the federal poverty line.

Older married couples tend to be better off financially than unmarried seniors (including divorced and widowed seniors as well as those who never married). The median income of married couples 65 and older was $43,087 in 2008, more than twice that of unmarried seniors ($16,757).

Unmarried women are especially vulnerable: 16.9 percent of unmarried women 65 and older had incomes under the federal poverty line in 2008, compared to 11.6 percent of unmarried men and 4.9 percent of married people in that age group. The federal poverty threshold is very low, well below what many experts view as necessary to meet basic needs.

Source: Social Security Administration, “Income of the Population 55 or Older, 2008,” April 2010, Tables 3.A1, 11.1.

11% of older women live below the federal poverty line.

The poverty rate of women ages 65 and older was 10.7 percent in 2009, much higher than the poverty rate of older men (6.6 percent). The federal poverty threshold is very low – $10,326 for single persons ages 65 and older in 2009 – well below what many experts view as necessary to meet basic needs. Because women tend to live longer, the number of poor women 65 and older (2.3 million) is more than twice the number of poor older men (1.1 million).

Source: Census Bureau, Current Population Survey, March 2009, Table POV01.

The average yearly Social Security benefit received by retired women is $12,012.

The average Social Security benefit for retired women was $1,001 per month, or $12,012 per year, in 2008 (latest available data). This was significantly lower than the average benefit for retired men of $1,299 per month, or $15,588 per year. Women have lower benefits because they typically have earned less and therefore contributed less to Social Security over the course of their working lives.

Source: “Annual Statistical Supplement to the Social Security Bulletin, 2009,” Office of Retirement and Disability Policy, Social Security Administration, February 2010, p. 2.  

Half of women age 65 and older have a yearly income of less than $14,429.

In 2008, the median income of women age 65 and older was $14,429, compared to $25,344 for older men. The estimated income older Americans need to meet basic needs, depending on homeowner status, is between $16,163 and $20,869, according to the Elder Economic Security Standard™ Index developed by Wider Opportunities for Women and the Gerontology Institute at the University of Massachusetts Boston (the 2006 index was converted to 2008 dollars).

Sources:

Patrick Purcell, “Income and Poverty Among Older Americans in 2008,” Congressional Research Service, October 2, 2009, p. 12.

“Elder Economic Security Standard Index Frequently Asked Questions,”  Wider Opportunities for Women, Gerontology Institute at University of Massachusetts Boston.

Consumer Price Index Inflation Calculator, Bureau of Labor Statistics.

Half of all families with 401(k)-type retirement plans and IRAs have less than $45,000.

Only half (52.6 percent) of families had 401(k)-type retirement plans or IRAs in 2007, and those who did had median savings of just $45,000 in those accounts, according to the Federal Reserve’s Survey of Consumer Finances. Though more recent survey data is not available, the total amount in these accounts was down 12 percent in 2009 relative to 2007, according to aggregate Federal Reserve figures.

Sources:

Bucks, Brian K.; Kennickell, Arthur B.; Mack, Traci L. and Moore, Kevin B. “Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances.”  Federal Reserve Board, February 2009, pp. A18-A19.

“Federal Reserve Statistical Release: Flow of Funds Accounts of the United States”, First Quarter 2010, Federal Reserve Board, June 10, 2010, Tables L.118.b and L.118.c.

1 in 2 private-sector workers do not participate in a retirement plan other than Social Security.

According to a Congressional Research Service analysis of U.S. Census Bureau data, only 43.6 percent of private-sector workers ages 25 to 64 participated in a pension, 401(k) or other retirement plan in addition to Social Security in 2008. Employers are not required to have a retirement plan. In 2008, 53.2 percent of private-sector workers in this age group were offered a retirement plan at work. Participation in a traditional pension plan is automatic, but it is a matter of choice for employees in 401(k)-type plans. Some workers who are offered 401(k)-type plans do not participate, often because they cannot afford to contribute to the plans and may not receive tax benefits or employer contributions. 

Among full-time private-sector workers in this age group, 59.0 percent were offered a retirement plan at work and 51.1 percent participated. Only 37.2 percent of part-time workers had access to a retirement plan and 23.0 percent participated.

An employer survey, the Bureau of Labor Statistics’ National Compensation Survey, shows somewhat higher participation levels, but still finds that only half of private-sector workers participate in a plan. One reason for the discrepancy between the two government surveys may be the ambiguous status of workers enrolled in “frozen” pension plans who are no longer accruing benefits.

Sources:

Patrick Purcell, “Pension Sponsorship and Participation: Summary of Recent Trends,“ Congressional Research Service, September 11, 2009, pp. 6, 13-15. 

Bureau of Labor Statistics, National Compensation Survey, “Employee Benefits in the United States,” March 2010, Table 1.

Half of retirees age 65 and older have a yearly income of less than $15,635.

The median income of people 65 and over without earnings was $15,635 in 2008. If earnings from work are included, the median increases to $18,337, according to Census Bureau data.

The median income of the older households was $29,744, compared to $56,791 for households with members under 65. Even adjusting for household size, the median income of older households is much lower than that of working-age households ($38,891 versus $24,511).

Sources:

Census Bureau, Current Population Survey, March 2009, PINC-01, Part 82.

Census Bureau, Current Population Survey, March 2009, PINC-01, Part 1.

Patrick Purcell, “Income and Poverty Among Older Americans in 2008,” Congressional Research Service, October 2, 2009.

Patrick Purcell, “Income of Americans Aged 65 and Older, 1968 to 2008,” Congressional Research Service, November 4, 2009. 

$14,050 is the average Social Security benefit received by retirees in 2010.

The average retiree will receive $14,050 in Social Security benefits in 2010. This is less than the income of a full-time minimum-wage worker ($15,080). The first statistic is from the Social Security Administration, and the second is derived by multiplying the federal minimum wage ($7.25) by 2080 hours. Some states have higher minimum wages.

Sources:

U.S. Social Security Administration, Office of Policy, “Monthly Statistical Snapshot”, July 2010, Table 2. 

U.S. Department of Labor, Employment Standards Administration, Wage and Hour Division, Compliance Assistance—Fair Labor Standards Act (FLSA).

The nation's Retirement Income Deficit is $6.6 Trillion.

The $6.6 trillion Retirement Income Deficit is the gap between the pensions and retirement savings that American households ages 32-64 have today and what they should have today to maintain their living standards in retirement.

The deficit figure covers households in their peak earning and saving years—those in the 32-64 age range—excluding younger workers who are just beginning to save for retirement as well as most retirees.  It takes into account all major sources of retirement income and assets:  Social Security, traditional pension plans, 401(k)-style plans, and other forms of saving, and housing. 

The measure assumes people will continue to work, save, and accumulate additional pension and Social Security benefits until they retire at age 65, later than most people currently retire.  It also assumes that retirees will spend down all their wealth in retirement, including home equity.  The deficit is thus in many respects a conservative number.

This figure was calculated for Retirement USA by the Center for Retirement Research at Boston College and is based on methodology developed for the Center’s National Retirement Risk Index. It assumes an inflation-adjusted 3 percent investment return similar to the 2.9 percent real rate of return assumed by the Social Security Administration for Treasury bonds. If a higher 4.6 percent return is used, the retirement income deficit shrinks somewhat to $5.2 trillion. If a lower 1.87 percent rate of return is used (the return on Treasury Inflation-Protected Securities, or TIPS), the deficit increases to $7.9 trillion.

Source: Center for Retirement Research at Boston College

Read our fact sheet to learn more about the Retirement Income Deficit.