Preparing for retirement remains a significant financial hurdle for many U.S. workers, according to a new report from the National Institute on Retirement Security (NIRS).
A new study examined how Americans across demographic groups are saving for retirement and highlighted the pressures limiting their ability to prepare for the future.
Drawing on data from the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP), the report finds that many working Americans lack access to employer-provided retirement plans, have limited savings, and face difficult tradeoffs between long-term retirement goals and immediate financial needs such as housing and student loan repayment.
While recent legislative efforts have made incremental improvements, the report notes that major challenges persist, including gaps in access to retirement savings systems and uncertainty surrounding the future of Social Security.
“At a time when Americans are facing a growing affordability crisis, we need to recognize that retirement should be part of that conversation,” said Dan Doonan, NIRS executive director.
“Most retirement programs today rely on workers saving voluntarily, with the tension between saving and the cost of buying a home, daycare, and college creating enormous challenges for the middle class. This research shows the fragility of both the nation’s retirement infrastructure and retirement preparedness for the typical U.S. household.”
Persistent Gaps in Access and Savings
One of the report’s central findings is that access to employer-sponsored retirement plans remains uneven. Many working Americans still do not have access to such plans, with public sector workers more likely to have plan sponsorship and participation than those in the private sector.
Hispanic workers, as well as individuals with lower incomes or lower levels of education, are significantly less likely to have access to or participate in retirement plans.
The report also underscores the continued importance of Social Security. Social Security accounts for roughly half of income for the typical older adult, while income from retirement plans—both defined benefit and defined contribution plans—represents about one-fifth of income on average.
The findings suggest that while Social Security is essential, it is not sufficient on its own to ensure financial security in retirement.
Savings levels among workers remain low. Among those with positive defined contribution savings, the median balance was $40,000 in December 2022.
When all workers are considered, including those with no savings, the median amount saved was just $955. Contribution rates also remain modest, with typical employee contributions ranging from five to six percent and typical employer contributions just under three percent.
“For example, the data indicate that among 55 – 64 year-olds, the median amount saved for retirement is only $30,000. Even among those with savings, balances often are far too low to support a secure retirement.
Today, too many households are forced to choose between paying their bills and saving for tomorrow. Strengthening access to reliable retirement plans is essential if we want Americans to retire with dignity rather than anxiety,” Doonan said.
Competing Financial Pressures
The report finds that retirement savings make up a relatively small share of overall financial assets for many workers. On average, retirement savings account for about one-quarter of financial assets, compared with about one-third represented by home equity. For some workers, the median value of a vehicle exceeds their retirement savings.
Student loan debt further complicates retirement preparedness. Workers with student loan debt are more likely to have access to and participate in retirement plans, but they tend to have lower account balances, fall further behind savings targets, and have significantly lower net worth than workers without student loan debt.
Scope and Methodology
The study focuses primarily on working-age adults ages 21 to 64 who are currently employed, and it also includes an analysis of adults age 65 and older.
It examines how retirement preparedness intersects with other major financial commitments, including homeownership and student loan debt, and how outcomes vary by age, income, education, race, and gender.
Read More:
- The $19,000 Tax-Free Strategy Baby Boomers Can Use To Help Younger Generations
- Frugal People Share the Best Items To Buy That Are Worth Every Penny (Even Though They’re Cheap)
- 3 Retirement Mistakes To Avoid
