Millions of US workers near retirement age with zero savings

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By Dan Sears

We’re not doing great.

Only one in 10 low-income workers between the ages of 51 and 64 had any retirement savings in 2019 — a significant decline compared with one in five low-income workers in 2007, according to a troubling report recently published by the US Government Accountability Office.

That’s in stark contrast to the nine in 10 high-income households that reported some kind of retirement account balance during the years 2007 to 2019. That same group enjoyed a surge in their median retirement assets, which almost doubled during that period.

“After a lifetime of work, all Americans should be able to retire with dignity,” Rhode Island Sen. Sheldon Whitehouse, said in a statement. “But today, millions of Americans are retiring with no savings.”

The report also shows that racial disparities persist in retirement savings, finding that white households were more likely to have money set aside and had about double the median balance as households of all other races.

Broken piggy bank.
Senior citizens were the only age group to see an increase in poverty rates, according to US Census data.
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Nearly seven in 10 Americans plan to retire, but of those who don’t think they will, 42% believe that they will never have enough savings to do so.

“What is depressing about [the Government Accountability Office’s work]…is that we’re looking at people’s right about to retire,” Teresa Ghilarducci, a retirement expert and professor of economics at The New School for Social Research in New York, told CBS Money Watch.

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“They’ve lived their whole lives, their working careers, under this new system of voluntary defined contribution plans, a decrease in defined benefit plans and a decrease in Social Security benefits — and this is the result.”

The staggering decline in retirement savings among millions of Americans comes down to two major factors, widening income inequality and a tax system that provides more savings benefits to the rich, the GAO and Ghilarducci claim.

Elderly money is counting the money in her purse
The Government Accountability Office’s report blamed widening income inequality and a tax system that provides more savings benefits to the rich as the main culprits as to why so many Americans don’t have the money to retire comfortably.
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Retirement savings “don’t come from inheritances, they don’t come from gifts — they come mainly from earnings, so when you have an earnings growth gap you’re going to have a retirement asset accumulation gap,” Ghilarducci explained.

The study examined data from the Federal Reserve’s Survey of Consumer Finances and other sources to determine that low-income workers had median earnings of about $19,100 annually, while high-income workers reported median earnings of $282,000.

While the economy recovered in many aspects in the two decades since the Great Recession, household incomes increased only slightly and income inequality has continued to widen, according to the report.

The problem is larger than the United States, according to reports. In 2020, the United Nations’ labor agency warned that the coronavirus pandemic led to a drop in income and rising income inequality for workers around the world.

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Records from 1970 to 2018 showed that median income for high-income American households rose 64%, while low- and middle-income people saw their earnings increased 43% and 49%, respectively, Pew Research Center found.

Distressed old age hispanic female check documents
Nearly seven in 10 Americans plan to retire, but of those who don’t think they will, 42% believe that they will never have enough savings to do so.
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Along with the wage gap, experts note the US tax system has also hindered the average worker’s retirement plan.

“Congress is concerned that federal tax incentives for workers to save in tax-preferred retirement accounts are going mostly to higher income workers—and are doing little to help low-income workers save for retirement,” the GAO report states.

The top-earning households were found to receive about 60% of the tax benefits from retirement accounts, while the lowest-income Americans get 5%, the GAO reported. The share of middle-income households with retirement accounts remained at about 60% from 2007 to 2019 but the median account balance dwindled from $86,800 to $64,300, the analysis concluded.  

The GOA report aligns with recent US Census data that found senior citizens were the only age group to suffer an increase in poverty rates.

In America today, 55% of senior citizens are trying to survive on less than $25,000 a year, the Federal Reserve reported.

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The bad news comes as some studies claim Americans are retiring earlier than they’d expected — though many still struggle with the retirement process.

David Edmisten, a certified financial planner and founder and lead adviser at Next Phase Financial Planning, shared his three tips that people should be following to guarantee wealth later on in life.

Edmisten specializes in helping “corporate professionals in their mid-50s and early 60s enter retirement with confidence” and advises those aiming for a comfortable retirement to buy stocks and bonds, increase their earning power and stay healthy.

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