The Changing Retirement Landscape: An Overview

A typical retirement scenario is no more as the national retirement savings landscape continues to shift. Thanks to increasing healthcare costs, longer life expectancies and continued savings struggles, more and more people are working well past the traditional age of retirement. For some, this is by choice, while for others, it’s a required and unwelcome decision.

Knowing where you stand in relation to the rest of the country and the reasons people are working longer can help you determine if you’re ready for the inevitability of older age and retirement.

What retirement savings look like around the country

According to the Center for Retirement Research at Boston College, half of all U.S. households are at risk of not having sufficient savings to maintain their living standards through retirement. Are these households close to the safe zone? The study goes further to say that boosting 401(k) contributions by five percentage points would only modestly reduce the retirement risk. In other words, many of those at risk are significantly below the required retirement savings threshold.

The survey further cites that the only way to make dramatic progress on these risk statistics is by combining increased savings with working an additional two years, which would cut the number of at-risk households down to 25%. While not cited in the study, better savings education, an earlier start and more consistent contributions may also help to lower the level of homes at risk.

America’s problem with unmet retirement savings goals

For many people, retirement savings don’t start early enough. Unfortunately, this leaves many well behind the curve and playing catchup to try and get prepared for the inevitability of retirement. According to the World Economic Forum, the retirement savings gap (the difference between the amount of savings needed and what people actually have saved) was $28 trillion for the U.S. in 2015. The study goes on to show that by 2050 the retirement savings gap is expected to swell to $137 trillion. This is a growth rate of $3 trillion annually.

What is interesting is the trend of insufficient retirement planning is not reserved for low-income earners. Many earners in higher income brackets are seeing the need to continue working far past the retirement age.  

“Even many so-called affluent individuals are working past retirement age because they wish to maintain their lifestyle. They realize that once they stop working, they will rely on what they’ve accumulated over the years,” says Joseph Finora, a financial communications expert and owner of Joseph Finora & Associates. “For those who have spent a lot, that may not be enough.”

Working past retirement age: a growing trend

A recent survey by Deloitte shows that many employees are working past the traditional 65 years old age of retirement. The workforce participation rate of those over the age of 65 has ballooned to 20% — the highest rate in 50 years.

Are people working longer by choice or by necessity? The answer is both. According to the survey, 23% of workers eligible for retirement choosing to stay in the workforce are doing so by personal choice. This was the second-largest block behind the 35% who were unsure as to why they were continuing to work.

Close behind the personal choice was 21% of people working because they needed health care coverage. This was this biggest jump from the 2017 survey to the 2019 survey of five percentage points. 12% of those polled cited not having saved enough for retirement as the reason for continuing to work.

Changing the retirement landscape

It’s clear there’s an issue with retirement savings in the U.S., and that the problem is trending toward getting worse. The push to change the retirement landscape is coming through multiple forms, including education, improved retirement plans and changes to the legal landscape.

Informative guides are being produced to inform people of the impending issues that a lack of preparation may set them up for. Many state governments are creating new laws requiring employers to offer private retirement or join state-sponsored plans.

For example, California is rolling out a new plan requiring employers in the state with five or more employees to offer private retirement options or join the state’s new CalSaver plan. The program will slowly roll out the full-scale plan over the next two years. California joins nine other states that now offer state-run retirement plan options.

Early versions of these plans, like the one offered in Oregon, have shown promise. OregonSaves, Oregon’s version of the plan, had more than 50,000 participants at the end of 2018 with an asset balance of $10.9 million. A good start, yes, but this works out to an average balance of less than $500 per participant.

How do you compare?

Curious how you stack up against the average retirement savings based on your age bracket? Here are the median retirement savings by age bracket from a 2015 study done by the Transamerica Center for Retirement Studies.

Age GroupMedian Retirement SavingsRecommended Savings
20s$16,0001x salary
30s$45,0001-2x salary
40s$63,0003-4x salary
50s$117,0006-7x salary
60s$172,0008-10x salary

Age bracket refers to the age of the saver. Median retirement savings refers to the average savings those in this bracket had on hand for retirement. The recommended salary multiple is the industry recommended times your salary you should have in your account for retirement. For example, if you make $50,000 annually, you should have 3-4x that in your account for retirement in your 40s, or $150,000-$200,000.

The Final Word

While these statistics paint a somewhat grim picture of the national retirement savings landscape, there is hope. Through proper education, you can create a well thought out plan to get started saving or get your savings back on track. This will require discipline, but in time you can get you and your family set up on the road to financial freedom.

Next steps

Jason Lee

Personal Finance Contributor

Jason Lee is a seasoned copywriter with a passion for writing about banking, tech, personal growth, and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill set with the rest of the world.