Typical Working Households Have Little Retirement Savings

Nearly 40 million working-age households, or about 45% of all working-age U.S. households, do not own any retirement account assets.

Among all working households—not just households with retirement accounts—the median retirement account balance is $2,500, according to an analysis by the National Institute on Retirement Security (NIRS).

The median retirement account balance was $3,000 for all working-age households as reported in a 2013 report from NIRS. The organization examined the readiness of working-age households, based primarily on an analysis of the Survey of Consumer Finances from the U.S. Federal Reserve System.

Nearly 40 million working-age households (45%) do not own any retirement account assets, in either an employer-sponsored 401(k)-type plan or an individual retirement account (IRA). Half of these households with no retirement savings are headed by someone between ages 45 and 65.

Households that do own retirement accounts have more than 2.4 times the annual income of households that do not own a retirement account. While retirement account ownership improved for households in the third highest income quartile, with 75.6% holding assets in retirement accounts, retirement account ownership in the lowest income quartile dropped to 21.4% in 2013, down from 25.7% in 2010.

The study found the median retirement account balance is $14,500 for near-retirement households. In addition, 62% of working households ages 55 to 64 have retirement savings less than their annual income.

Even after counting households’ entire net worth, two-thirds (66%) of working families fall short of conservative retirement savings targets for their age and income based on working until age 67. According to the NIRS, due to a long-term trend toward income and wealth inequality that only worsened during the recent economic recovery, a large majority of the bottom half of working households cannot meet even a substantially reduced savings target.

The study report says public policy can play a critical role in putting all Americans on a path toward a secure retirement by strengthening Social Security, expanding access to low-cost, high-quality retirement plans, and helping low income workers and families save. Social Security could be strengthened to stabilize system financing and enhance benefits for vulnerable populations. Access to workplace retirement plans could be expanded by making it easier for private employers to sponsor defined benefit pensions, and through national and state proposals to ensure universal retirement plan coverage. Finally, expanding the Saver’s Credit and making it refundable could help boost the retirement savings of lower-income families.

The study report may be accessed from here.