Workers in the U.S. are struggling to save to retire
Report: US workers saving too little to retire
Tue Mar 19, 2013 2:31PM
Workers and employers in the U.S. are bracing for a retirement crisis, even as the stock market sits near highs and the economy shows signs of improvement.
New data show that powerful financial and demographic forces are combining to squeeze individuals and companies that are trying to save for the future and make their money last.
Fifty-seven percent of U.S. workers surveyed reported less than $25,000 in total household savings and investments excluding their homes, according to a report to be released Tuesday by the Employee Benefit Research Institute. Only 49% had reported having so little money saved in 2008.
The survey also found that 28% of Americans have no confidence they will have enough money to retire comfortably-the highest level in the study’s 23-year history.
The same forces are weighing on corporate balance sheets. Based on another recent report, the Society of Actuaries said that rising life expectancies could add as much as $97 billion to corporate pension liabilities in coming years, an increase of up to 5%.
While Americans are living longer, the extended life spans will make it tougher for workers trying to stretch retirement savings and put additional strains on pension plans.
The percentage of workers who have saved for retirement plunged to 66% from 75% in 2009, according to the Employee Benefit Research Institute survey.
Only about half of the 1,003 workers and 251 retirees surveyed said they were sure they could come up with $2,000 if an unexpected need were to arise in the next month.
The survey of workers and retirees was conducted in January, even as the U.S. stock market was heading toward new highs.
Many people are struggling to make sure they don’t run out of money in retirement, said Jack VanDerhei, research director at EBRI, a nonprofit in Washington, D.C.
The EBRI survey doesn’t count traditional pensions, which are designed to provide retirees for steady income throughout their lives.
But pensions have become a much smaller component of Americans’ retirement-savings mix over the years. The portion of private-sector U.S. workers covered only by so-called defined-benefit plans fell to 3% in 2011 from 28% in 1979, according to U.S. Department of Labor data compiled by EBRI.
The Society of Actuaries in September released the first update since 2000 to its mortality projections for U.S. retirement plans, which project life spans for pensioners.
The report offers assumptions that actuaries use to project mortality rates.
Companies are expected to start using the new assumptions this year.
According to the Society, a male who reaches age 65 in 2013 is expected to live an additional 20.5 years, up from 19.5 in the earlier projections. Women turning 65 this year are now expected to live an additional 22.7 years, up from 21.3.
The effect of longer life spans on pension obligations has been dwarfed by the impact of declining interest rates over recent years. Because of the way pension obligations are calculated, lower interest rates means that future obligations are higher today.
But interest rates are likely to rise at some point, which will lessen pension obligations. That is less likely with longevity assumptions.
Joe LaCascia, a 75-year-old retired insurance broker in Polk City, Fla., said he and his wife thought they would have enough savings outside their life insurance policies to last until age 95. Now, he estimates he only has enough to last until they’re 85.
He said he is more concerned about what the future holds for his children, a 51-year-old art director-turned-roadie and a 49-year-old third-grade teacher.
“They’re never going to be able to create wealth, other than what our generation leaves them and what they do with it,” he said. “They have more uncertainty than we have.” WSJ