WASHINGTON—A new report claims the median retirement account balance among all working class individuals is $0.00. In other words, they have nothing.
The analysis of U.S. Census Bureau data also indicates 57% (more than 100 million) of working age individuals do not own any retirement account assets in an employer-sponsored 401(k)-type plan, individual account or pension.
These findings are contained in a new research report, Retirement in America | Out of Reach for Most Americans?, which was issued by the National Institute on Retirement Security (NIRS) and is available here.
The analysis found that overall four out of five working Americans have less than one year’s income saved in retirement accounts. In addition, and not surprisingly, 77% of Americans fall short of conservative retirement savings targets for their age based on working until age 67 even after counting an individual’s entire net worth – a generous measure of retirement savings, the analysis notes. Moreover, a large majority of working Americans cannot meet even a substantially reduced savings target, the report states.
Income Inequality
Growing income inequality widens the gap in retirement account ownership, the report found. Workers in the top income quartile are five times more likely to have retirement accounts than workers in the lowest income quartile, according to the data, and those individuals with retirement accounts have, on average, more than three times the annual income of individuals who do not own retirement accounts, the study shows.
“The facts and data are clear. Retirement is in peril for most working-class Americans,” said Diane Oakley, report author and NIRS executive director, in a statement. “When all working individuals are considered — not just the minority with retirement accounts — the typical working American has zero, zilch, nothing saved for retirement.
‘Middle Class Nightmare’
“What this report means is that the American dream of a modest retirement after a lifetime of work now is a middle class nightmare,” she continued. “Even among workers who have accumulated savings in retirement accounts, the typical worker had a low account balance of $40,000. This is far off-track from the savings levels Americans need if they hope to sustain their standard of living in retirement.”
The retirement savings shortfall can be attributed to a multitude of factors and a breakdown of the nation’s retirement infrastructure, the report states. There is a massive retirement plan coverage gap among American workers, fewer workers have stable and secure pensions, 401(k)-style defined contribution (DC) individual accounts provide less savings and protection, and jumps in the Social Security retirement age translate into lower retirement income, the NIRS said.