The Government Accountability Office (GAO) has released a report indicating that many retirees and workers approaching retirement have limited financial resources. About half of households ages 55 and older are without a 401(k) plan, an individual retirement account (IRA) or any other form of retirement savings.
Based largely on the GAO’s analysis of household financial data obtained on the Baby Boom generation from the Federal Reserve’s 2013 Survey of Consumer Finances, the report shows the financial status of the different segments of that population. For example, many older households without retirement savings have few other resources, such as a defined benefit (DB) plan or nonretirement savings, to draw on in retirement. Among households ages 55 and older, about 29% have neither retirement savings nor a traditional pension. However, households that have retirement savings generally have other resources to draw on, such as non-retirement savings and defined benefit plans.
Among households with some retirement savings, the median amount is about $104,000 for those ages 55 through 64 and $148,000 for households ages 65 through 74—the equivalent of an inflation-protected annuity of $310 and $649 per month, respectively. Social Security provides most of the income for about half of households ages 65 and older.
According to the GAO’s resources for the study, which also included other surveys, academic studies of retirement savings adequacy and interviews with retirement experts about retirement readiness, about one-third to two-thirds of workers may be unable to maintain their pre-retirement standard of living. The GAO acknowledges, however, that arriving at a figure was difficult, as studies and surveys employed varying assumptions as to what that income goal requires.
Surveys showed that, compared with current retirees, workers ages 55 and older expect to retire later and that a higher percentage plan to work during retirement. However, one survey found that about half of retirees said they had retired earlier than planned due to health problems, changes at their workplace, or other factors, suggesting that many workers may overestimate their future retirement income and savings. Surveys have also found that people ages 55 through 64 are less confident about their finances in retirement than those aged 65 or older.
The GAO performed the study because of concerns over the growing aging population—the Census Bureau projects that the aged 65-and-older population will grow more than 50% between now and 2030—who may live longer but have inadequate or no retirement savings, and the uncertainty of Social Security’s long-term solvency.
The Department of Labor (DOL) reviewed the study and provided technical comments.