About Half of Older Households Have No Retirement Savings, and Many Rely on Social Security

According to our analysis of data from the 2013 SCF, 52 percent of  households age 55 and older have no retirement savings in a DC plan or  IRA, and Social Security provides most of the retirement income for about  half of households age 65 and older. 1). Most of the households in this age group have some  other resources or benefits from a DB plan, but 27 percent of this age  group have neither retirement savings nor a DB plan. Among households age 55-64, the 41 percent with no retirement savings  have few other financial resources but they are less likely to have debt  than those with retirement savings.have less than $25,000 in total financial assets, such as in savings  accounts or non-retirement investments. Six In Ten Households Age 55- 64 Have Some Retirement Savings

For the 59 percent of households age 55-64 with some retirement  savings, we estimate that the median amount saved is about $104,000,  which is equivalent to an insured, inflation-protected annuity of $310 per  month for a 60-year-old. Studies and Surveys Provide Mixed Evidence on the Adequacy of Retirement Savings among Workers and Retirees Studies of Retirement Savings and Income Adequacy Conclude Different Things about U.S. Retirement Security, Largely Because of Different Savings Targets

Economists broadly agree that a conceptual benchmark measure for  adequate retirement saving is an amount that will, along with other  sources of retirement income, allow a household to maintain its pre- retirement standard of living into retirement. However, there is no  consensus about how much income this standard requires. Assumptions about income targets and methodology help drive the  conclusions of these different studies. Surveys Show That Workers Age 55 and Older Approaching Retirement May Overestimate Their Ability to Earn Future Income

Surveys indicate that workers age 55 and older generally plan to retire at  an older age and work more in retirement than current retirees actually  did. The Federal Reserve survey also suggests that many workers may  unrealistically expect to continue working as long as possible or transition  to new work when they “retire”. People Age 55-64 Are Less Confident about Their Financial Well-Being in Retirement Than Those over 65

As compared to people age 55-64, many people over 65 report being  able to manage financially. According to the 2013 Survey of Consumer Finances, two-thirds of  households age 65-74 say their received or expected retirement income  is at least enough to maintain living standards (66 percent). Moreover, poverty rates are higher for people approaching retirement and  people who are 75 and older. Agency Comments

We provided a draft of this report to the Department of Labor, the  Department of the Treasury, and the Social Security Administration for  review and comment. The Department of Labor provided technical  comments, which we incorporated as appropriate. 2. What evidence do studies and surveys provide about retirement  security for workers and retirees? Retirement Financial Resources

To describe the financial resources of near and current retirees, we  examined financial information from the 2013 Survey of Consumer  Finances (SCF). Income from DB plans includes traditional pensions with lifetime benefits and annuitized  DC plans. We also interviewed authors of studies and other retirement  experts about retirement readiness. We also reviewed survey questions of retirees and workers approaching  retirement age to infer information about their experiences of saving for  and living in retirement. Based  on this, we found the data to be reliable for the purposes used in this  report.
Why GAO Did This Study

As baby boomers move into retirement each year, the Census Bureau projects that the age 65-and-older population will grow over 50 percent between 2015 and 2030. Several issues call attention to the retirement security of this sizeable population, including a shift in private-sector pension coverage from defined benefit plans to defined contribution plans, longer life expectancies, and uncertainty about Social Security's long-term financial condition. In light of these developments, GAO was asked to review the financial status of workers approaching retirement and of current retirees.
GAO examined 1) the financial resources of workers approaching retirement and retirees and 2) the evidence that studies and surveys provide about retirement security for workers and retirees. To conduct this work, GAO analyzed household financial data, including retirement savings and income, from the Federal Reserve's 2013 Survey of Consumer Finances, reviewed academic studies of retirement savings adequacy, analyzed retirement-related questions from surveys, and interviewed retirement experts about retirement readiness. GAO found the data to be reliable for the purposes used in this report.
GAO received technical comments on a draft of this report from the Department of Labor and incorporated them as appropriate.

What GAO Found

Many retirees and workers approaching retirement have limited financial resources. About half of households age 55 and older have no retirement savings (such as in a 401(k) plan or an IRA). According to GAO's analysis of the 2013 Survey of Consumer Finances, many older households without retirement savings have few other resources, such as a defined benefit (DB) plan or nonretirement savings, to draw on in retirement (see figure below). For example, among households age 55 and older, about 29 percent have neither retirement savings nor a DB plan, which typically provides a monthly payment for life. Households that have retirement savings generally have other resources to draw on, such as non-retirement savings and DB plans. Among those with some retirement savings, the median amount of those savings is about $104,000 for households age 55-64 and $148,000 for households age 65-74, equivalent to an inflation-protected annuity of $310 and $649 per month, respectively. Social Security provides most of the income for about half of households age 65 and older.
Studies and surveys GAO reviewed provide mixed evidence about the adequacy of retirement savings. Studies range widely in their conclusions about the degree to which Americans are likely to maintain their pre-retirement standard of living in retirement, largely because of different assumptions about how much income this goal requires. The studies generally found about one-third to two-thirds of workers are at risk of falling short of this target. In surveys, compared to current retirees, workers age 55 and older expect to retire later and a higher percentage plan to work during retirement. However, one survey found that about half of retirees said they retired earlier than planned due to health problems, changes at their workplace, or other factors, suggesting that many workers may be overestimating their future retirement income and savings. Surveys have also found that people age 55-64 are less confident about their finances in retirement than those who are age 65 or older.