More evidence of America's shortfall in retirement savings

"Most households approaching retirement have low savings." That's the no-nonsense title of a recent report from the U.S. Government Accountability Office (GAO) on retirement security. Here are a few of its sobering results:

  • About half of all households age 55 and over have no retirement savings.

  • Many older households don't have other financial resources to tap during retirement.

  • Of those households without any savings, more than half don't have a pension from a traditional pension plan, and almost half don't own a home.

The GAO's report discusses the mixed evidence on the adequacy of retirement savings in America, noting that the various studies use different assumptions about how much income is needed in retirement and what appropriate retirement ages are. These studies show that anywhere from one-third to two-thirds of Americans are at risk of falling short of adequate retirement incomes. Many older workers say they want to continue working in their retirement years, yet some studies indicate that many Americans retired earlier than they had planned.

The GAO report joins the deluge of information about the inadequacy of retirement savings in America. A quick Google search shows recent articles from a variety of media sources, including Huffington Post, Forbes, Reuters, The New York Times, USA Today and The Wall Street Journal. The subtitle of the Huffington Post article certainly grabs your attention: "22 percent of Americans would rather die than retire without enough money."

These articles cite authoritative reports from think tanks and academic institutions such as the Boston College Center for Retirement Research, Employee Benefit Research Institute, Federal Reserve, National Institute on Retirement Security, National Bureau of Economic Research and Transamerica Center for Retirement Studies as evidence of their claims.

There's no doubt that some significant part of the population won't have a financially secure retirement. The main source of disagreement seems to be on the size of this group and what should be done about it. The potential solutions are easier said than done, but they include some combination of the following:

  • Spend less and save more today
  • Retire later
  • Reduce your standard of living in retirement

Another thing is clear: Simply admonishing people to save more hasn't worked. Somehow, individuals, employers and governments will need to find the collective motivation and will to address these serious challenges.

Some people might call this a looming retirement crisis, while others might just think it's a big disappointment because many people are falling short of their financial expectations and may need to work a long time. Whatever you call it, it's fair to say we have a problem.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.