The American nest egg is facing financial extinction. Aging workers who thought they could relax in retirement face unprecedented economic stressors, according to new analysis of retirement wealth.
Data from Economic Policy Institute (EPI) reveals retirement wealth is turning into retirement poverty for a growing portion of working households. The labor-focused think tank finds that “retirement wealth has not grown fast enough to keep pace with an aging population and other changes.” While retirement wealth has risen in absolute terms since the 1990s, EPI observes that the growth trend has lagged behind changes in the aging population’s size and needs. Instability has generally grown due to a shift from steadier defined-benefit plans to more financially volatile defined-contribution savings accounts. Social Security cutbacks have further eroded assets, bringing “increased longevity risks and investment risks.” When sorted by age group, retirement funds have stagnated or declined overall, with an especially steep drop among 56- to 61-year-olds, from nearly $212,000 in 2007 to less than $164,000 in 2013.
Across age groups, most families, according to EPI, “have little to no retirement savings,” and many of those headed by workers approaching retirement age have nothing to fall back on. Researchers found: “For most age groups, median account balances in 2013 were less than half their pre-recession peak and lower than at the start of the new millennium.” The portion of households of 32- to 61-year-olds participating in any kind of retirement plan has ebbed.
The retirement crunch disrupts the entire life cycle. Middle-aged, formerly middle-class households, crushed by debt or unstable employment, may not even foresee a time when they’re secure enough to stop working. And for those just starting their careers, a typical thirtysomething has a grand total of about $480 put away for their later years. (And with bank accounts hemorrhaging about 10 grand a year throughout the recession, expect to see more grandpas stocking shelves at the mall.)
Employers have shifted away from pensions in recent years to IRA and 401(k) plans. These accounts, a neoliberal market-based solution structured around period employer and worker contributions, are steadily replacing the classic “defined benefit pension,” which provides a guaranteed, stable payout over time.