A generation of Americans unprepared for retirement

Almost half of U.S. households could fall short of what they need for retirement, according to a report from the Morningstar Center for Retirement and Policy Studies.

It’s further evidence of what many experts have been calling a looming retirement crisis in America.

The oldest members of Generation X — people born between 1965 and 1980 — are within ten years of retirement. Most of them don’t have pensions after a shift from defined benefit retirement plans to personal savings and 401(k) investments. Many of them, along with the youngest of the Baby Boomers, find their savings are short of where they need to be for a financially secure retirement.

Morningstar, as relayed by CNN Business, found 47% of U.S. workers don’t have access to 401(k) plans and that, among those who do have access, 16% don’t participate.

Private-sector employees are most at risk. Public-sector workers still have access to pensions and also to 401(k) and similar plans.

Sadly, this tracks with our own survey, conducted earlier this year, that found that 80 percent of voters said they are not prepared for retirement and 87 percent agreeing with the worry that the country as a whole is facing a retirement crisis.  

Morningstar’s advice? Start a workplace retirement account — a 401(k), 403(b), or similar plan — if it’s available to you. And plan your retirement date carefully based on the funds that will be available when your career ends.

Silver Squatters

It’s not just the oldest Gen Xers who need to be thinking about this. Americans in their 40s and 50s — the so-called “Silver Squatters” — may need financial help from their families when they retire, according to a Prudential Financial analysis reported by Newsweek.

The average 55-year-old American has less than $50,000 in savings, according to the report, and they are “nearly twice as likely as 65- and 75-year-olds to rely on ‘do-it-yourself’ employer-sponsored plans like 401(k)s to fund their retirement.”

One-third of the people in that group have already postponed their retirements, a decision Prudential attributes to “persistent inflation.” It’s not just retirement: 35% of 55-year-olds in that survey said they would have trouble pulling together $400 in a month to cover an emergency expense, compared to 19% of 65-year-olds and 15% of 75-year-olds.

Working past retirement

Some people don’t want to quit working and others can’t because they don’t have the financial means to retire securely. And as the Washington Post notes, there are now five generations in the workforce at the same time.

In 1990, about 10% of the workforce was made up of people over 55 years of age. Now that’s 23%, and the number is expected to remain at that level for at least a decade.

According to Next Avenue, some retirement-age workers are retiring slowly instead of all at once, gradually making the transition from working to full retirement. Both Fidelity Investments and Allianz Life have done surveys showing large numbers of retirees want to phase out their work lives instead of just cutting them off.

Most employers don’t have phased retirements built into their organizations, but the idea is getting attention. It eases a tightening labor market, keeps experienced people available, and satisfies a growing demand from some of their employees. According to the Transamerica Institute’s “Workplace Transformations: Employer Business Practices and Benefit Offerings,” about one-third of employers have phased retirement programs and another 28% say they’re thinking about it.