AARP Eye Center
Our nation and its working families face an unprecedented crisis: a vast retirement savings deficit, estimated to be as much as $6.6 trillion, or about $57,000 per household. New research from the National Institute of Retirement Security (NIRS) shows an alarming lack of retirement savings among average working-age households in the United States. According to NIRS, the average working household in America has only about $3000 saved for retirement and 45% of working-age households – about 38 million -- have no retirement savings at all. In Connecticut, over 45% of all workers have no access to a retirement savings plan through their job, according to The Retirement Security Project (RSP). Among workers of color the outlook is even bleaker. The NIRS examined what they call a “racial divide” in retirement savings that found workers of color, in particular Latinos, were significantly less likely than White workers to be covered by an employer-sponsored retirement plan—whether a 401(k) or defined benefit (DB) pension. The report found that this lack of access substantially drives down the level of retirement savings.
It is clear that workers are not prepared for retirement, and as baby boomers continue to retire, we will see this crisis grow unless we act now.
While Social Security provides an essential baseline of income for retirees, Social Security alone will not provide enough to pay the bills during our retirement years. The average monthly Social Security benefit is only about $1,300. Employer sponsored retirement plans and individual savings, in addition to Social Security, are critical components to ensuring a secure retirement.
Use AARP's Retirement Calculator to find out if you're saving enough.
The good news is that there are some simple steps that we can take to avert this crisis. For instance, we know that when offered the opportunity at work to save for retirement; seven out of ten people choose to participate. In fact, one of the biggest predictors of whether an individual will save money toward a secure retirement is whether or not they have access to an employer-sponsored retirement savings plan. That's why AARP Connecticut is pushing for legislation that would encourage more people to save for their future and make it easier for them to save at work. Senate Bill 249 - An Act Promoting Retirement Savings, would create a state-administered retirement savings plan for employees of small businesses and other low-income private sector employees with no access to an employer-sponsored retirement plan. Read AARP's full testimony on the bill here.
In a time when people are increasingly responsible for planning their own financial security in retirement, AARP believes we need to explore new models for private sector retirement plans that allow workers to set aside wages through an easily accessible, safe, pre-tax, cost-efficient retirement savings vehicle.
See also: Take Charge of Your Future with Work and Save.