Americans For Secure Retirement | WHY RETIREMENT SECURITY IS AT RISK<br>

WHY RETIREMENT SECURITY IS AT RISK

For one thing, people do not save enough for retirement. But apart from that, other factors put the retirement security for millions of Americans at risk.

		Americans are living longer – for many, a lot longer than they projected when they were saving for retirement. The life expectancy of a 65-year-old is close to age 83, more than four years longer than in 1960. In fact, half of all retirees will live beyond average life expectancy. And unprecedented numbers will be living into their 90s and past 100. The possibility of living longer compounds the challenge: Retirees not only need to save more, they also need to convert their savings into a stream of income that will last 20 to 30 or more years. This is why experts say the biggest financial risk retirees face is not knowing how long they will live (i.e., longevity risk).

		Americans are spending more time in retirement. Not only are we living longer, we’re retiring sooner than previous generations. The average age of retirement today is 62 years old.

		The traditional pension check is fast becoming a thing of the past. Significantly fewer retirees will enjoy the security and regularity of the monthly pension checks that many employers once paid. Thirty years ago, 40 percent of workers had a traditional pension. That amount has been cut in half – down to 21 percent and dropping. The result: retirees increasingly will bear the responsibility themselves for generating a consistent “paycheck” for as long as they live. Access to adequate pension coverage is especially low at the low- and middle-income levels (Table 1). Sixty percent of workers with household incomes of less than $50,000 lack pension coverage (compared with 25 percent of workers earning more than $50,000 annually).

		Social Security is not enough. Baby boom retirements will place enormous demands on an already strained Social Security trust fund. The projections are staggering. By 2030, the number of Americans 65 and older will have more than doubled. But even before then, in 2018, the trust fund is expected to begin running cash deficits. Social Security payments are not expected to keep up with the cost of living, especially health care. By 2050, Social Security benefits promised under current law would cost nearly 18 percent of the nation’s payroll – while revenues would total just over 13 percent.

		Even careful savers have limited control over their future income. Besides the possibility of longevity, there’s the volatility in the stock and bond markets to contend with. Retirees also face risks to their retirement security from possible medical crises that could require home, nursing or long-term care.

		The Public Policy Problem
		*Are you* at risk?**