Retirement Reality: Half of Americans Will Have a Lower Standard of Living
New insights from the Center for Retirement Research at Boston College suggest that about half of American households won’t be able to maintain the same standard of living they have today in their golden years.
The study, which tracked workers’ wealth-to-income trajectories between 1983 and 2013, found that the numbers have remained steady for the entire 30 years—which doesn’t bode well for today’s savers.
Analysts say they should be upping their savings game to compensate for changes to Social Security, longer life spans and increasing health care costs.
So what’s preventing people from socking away more? The biggest factor is the lack of pensions: Back in 1979, a whopping 28% of workers in the private sector were able to rely on them as their sole retirement plan—but that number dropped to 3% by 2011.
As a result, the average 62- to 65-year-old in 2013 had amassed wealth about three times his income—which is actually slightly below the 1983 figure.
To get back on track, the Center estimates that households will need to save about 70% of their pre-retirement income in order to lead a comparable lifestyle down the line. That translates to funneling about 15% of each paycheck over the course of 30 years.
Just keep in mind that these estimates assume that retirees will downsize their living expenses after they stop working and won’t spend as much once they’re no longer caring for children and other dependents.
If this news has you motivated to increase your retirement savings today, start by incorporating these six small moves that can make a big difference to your nest egg.