The AARP study “What Are the Retirement Prospects of
Middle-Class Americans?” gives a snapshot of the retirement prospects of workers age 25 to
54, particularly those in the middle class.
Using The Urban Institute’s Dynamic
Simulation of Income Model, the study’s authors, Barbara Butrica and Mikki
Waid, project that workers today are less likely than their parents or
grandparents to enjoy the living standards of their working years when they
retire. Much of the projected decline is expected because health care costs are
rising faster than wages.
Employee contributions to workplace
health insurance and retirement plans have reduced take-home pay. Skyrocketing
health care costs and college tuitions have further strained family budgets.
The recession and ongoing financial crisis, which eliminated millions of jobs
and wiped out trillions of dollars in household wealth, have tightened the
squeeze on middle-class families and cast a shadow on the future retirement
prospects of today’s workers.
The study gives the following
statistics about the incomes of future retirees:
- Future retirees are predicted to
have only slightly more retirement income than today’s retirees. Median retirement income is projected to be $34,500 (in 2012
dollars) for future retirees, a 20% increase from current retirees.
- Medical expenses will wipe out the
small retirement income gains for future retirees. When out-of-pocket medical expenses are taken into account,
the median retirement income of future retirees (at age 70), net of health
expenses, is expected to be about $27,000—the same as that of current retirees.