The statistics are alarming. Most Americans are not saving enough for retirement. Many are saving nothing at all:
- The median retirement account balance for all American households in 2010? $3,000.
- The percentage of households with assets in retirement accounts in 2013? 49.2—a drop from 50.4 percent, or just over half, in 2010.
- The fraction of Americans who have access to a retirement plan through work? Half.
- The share of adults who report not having started saving for retirement? More than one third (36 percent).
- The share of adults approaching retirement age (50 to 64) who report not having started saving for retirement? More than one quarter.
- Middle-class Americans who say they plan to save “later” for retirement in order to “make up for not saving enough now?” 55 percent.
- The total amount of U.S. household savings and investments held in cash and cash-related products? Almost two-thirds.
The recession that impacted nearly all Americans over the last decade played a role in poor savings behavior. The Federal Reserve’s Survey of Consumer Finances noted that the drop in households with retirement assets from 2010 to 2013 in fact continues “the downward trend also observed between…2007 and 2010.”
Younger families and families with lower earnings are particularly at risk for poor retirement savings, but they are not alone. Nationally, more than a third of adults say they have not started saving for retirement yet, according to a national survey from Bankrate’s monthly Financial Security Index. But, alarmingly, the same survey shows that more than a quarter of respondents age 50 to 64 have yet to start saving.
And while the vast majority of families ages 35 to 64 who are at the upper end of income distribution participate in some sort of retirement plan, 94.6 percent in 2013, there are still 5 percent of these earners who are not participating.
Pensions are an effective and established solution to this problem. They are broad based, meaning that all eligible employees participate in the savings plan. Because workers are automatically enrolled, they are guaranteed participation in a plan that will provide replacement income once they stop working.
Pensions also address some of the biggest reasons why employees do not participate in other plans at greater rates—employees do not have to actively enroll and are not required to make investment decisions. Furthermore, participants in most pension plans cannot borrow or withdraw money from the retirement plan before reaching retirement age.
While strong evidence continues to point to the fact that the majority of Americans have saved far too little to be self-sufficient in retirement, Colorado PERA members contribute to their own savings from every paycheck throughout their entire careers as public employees, foregoing Social Security. This results in a modest but secure monthly benefit during their retirement, enabling PERA retirees to be active members of their communities that contribute to local economies across Colorado.