Persistent unemployment and stagnant wages have left many workers treading water, struggling so hard to stay afloat that they couldn’t open a retirement account even if they wanted to.
A new report from the National Institute on Retirement Security, based on analysis of the 2010 Survey of Consumer Finances, shows that about 45 percent of all working-age households don’t hold any retirement account assets, whether in an employer-sponsored 401(k) type plan or an individual retirement account.
Among those 55 to 64 years old, two-thirds of working households with at least one earner have retirement savings less than one year’s income, far below what they will need to maintain their standard of living in retirement. By a variety of measures, most households, even those with defined benefit pensions, are falling far short of the savings they will need.
The report lends weight to longstanding criticisms of the increased reliance on individual savings in the United States retirement system, including Jacob Hacker’s “The Great Risk Shift: The Assault on American Jobs, Families, Health Care and Retirement and How You Can Fight Back” and Teresa Ghilarducci’s “When I’m 64: The Plot Against Pensions and the Plan to Save Them.”
Current efforts to encourage 401(k) and I.R.A. accounts primarily benefit those who already have substantial savings. The National Institute on Retirement Security report shows that households with retirement accounts have five to six times the non-retirement wealth of non-owning households in the same age group. Recent research on tax incentives in Denmark shows that they encourage shifts from conventional accounts to retirement accounts, rather than increasing overall savings.
Chosen excerpts by Job Market Monitor