Are You One of the Many with No Retirement Savings?

Empty-pocket-1-1536707“The National Institute for Retirement Security examines the retirement account balances, or lack thereof, for all working-age individuals.”

Can you believe that the “typical working American” doesn’t have any retirement savings? That’s according to a new report from the National Institute on Retirement Security.

Think Advisor’s recent article, “Most Americans Have $0 Saved for Retirement: NIRS” says that, using U.S. Census Bureau data, the report looked at median retirement account balances for those age 21 to 64. The report revealed that nearly 60% of all working-age individuals don’t have assets in a retirement account. That’s based on the Census Bureau’s Survey of Income and Program Participation data from the year 2014.

With 59.3% of people not owning a retirement account, a worker in the middle of the overall workforce would have a goose egg in retirement savings. The National Institute on Retirement Security report found that nearly about three-quarters of workers in the 21-to-34 age bracket, over half of those ages 35 to 44, half ages 45 to 54, and also about half in the 55-to-64 age range don’t have a retirement account.

The report included in its definition of retirement accounts employer-sponsored plans like 401(k)s, 403(b)s, 457(b)s, SEP IRAs and Simple IRAs, as well as private retirement accounts—such as traditional and Roth IRAs. In the report’s analysis, an individual was deemed to own a retirement account, if her total retirement account assets were more than zero. There’s a significant gap between older and younger folks in retirement account ownership, and the report found that that this gap is much wider across income groups.

“Individuals with retirement accounts have a higher median income of $51,024, compared to $17,004 among individuals without retirement accounts—three times as large,” the report states.

The research also showed that the median account balances were insufficient, even among individuals with retirement accounts. In fact, for those approaching retirement (age 55 to 64) with retirement accounts, the average balance was $88,000. The report suggested this amount would only provide a “few hundred dollars per month in income if the full account balance is annuitized, or if an individual follows the traditionally recommended strategy of withdrawing 4% of the account balance per year (this amounts to less than $300 per month).”

In addition, the report found that 22% of working individuals age 21 to 64 with retirement savings had saved less than a year’s income. Among working individuals closest to retirement (age 55 to 64), just 17% of those with retirement savings saved this amount. That’s not many. Given these standards, early retirees would need to save retirement assets, equal to 14 times their salary at age 62. The savings target of 10 times income at age 67, is designed to enable income payments to last until a person is 93.

Reference: Think Advisor (September 18, 2018) “Most Americans Have $0 Saved for Retirement: NIRS”