Half of U.S. Households at Risk of Retirement Shortfall

What You Need to Know

Even those who plan prudently are at risk, the Center for Retirement Research finds in a revamped survey.
The finding has been consistent for years, pointing to systemic problems, researchers suggest.
CRR recommends that defined contribution plan coverage be made universal.

Roughly half of the nation’s working-age households are at risk of falling short of much-needed wealth during their retirement years — even if they work to age 65, make good decisions about Social Security and smartly utilize annuities in the planning process.

This is the stark conclusion drawn by the newly revamped National Retirement Risk Index released this week by the Center for Retirement Research at Boston College. The index measures the share of working-age households found to be at risk of being unable to maintain their current standard of living in retirement.

According to the CRR, the updated index offers a range of key insights for retirement industry professionals — many of which are deeply concerning.

Simply put, the index shows America has a serious retirement readiness problem on its hands, one which individuals, employers, policymakers and financial industry practitioners must confront in the years ahead.

What the Data Now Shows

According to the CRR, despite the extensive changes in the methodology underlying the long-running NRRI, the most important findings from previous iterations still hold.

According to the index, about half of working-age households will not be able to maintain their pre-retirement living standard. Moreover, the readiness pattern continues to reflect the health of the economy, raising the possibility that a forthcoming recession could tip even more American households into the at-risk category.

As the CRR notes, the at-risk population increased substantially from 2007 to 2010 during the Great Recession, and then it declined “a bit” from 2013 to 2019 as the economy enjoyed low unemployment, rising wages, strong stock market growth and rising housing prices.

Unfortunately, these improvements were modest due to some countervailing longer-term trends, such as the gradual rise in Social Security’s full retirement age and the continued decline of interest rates — which made it more difficult for households to achieve retirement readiness.

The CRR leadership says this robustness of the results confirms the retirement saving issue faced by today’s working-age households is a deeply entrenched problem, and that the United States desperately needs to fix its retirement system.

The main solution offered by the CRR leadership is that employer defined contribution plan coverage be made universal. Only with continuous coverage will workers be able to accumulate adequate resources to maintain their standard of living in retirement, the CRR warns.