Yes, there really is a retirement saving crisis, concludes a study by Boston College’s Center of Retirement Research. Overall, the center found, about 43% of U.S. households are at risk of being unable to maintain their current standard of living in retirement.
The figure isn’t much better for boomers, according to the National Retirement Risk Index compiled by the Center’s researchers–Alicia H. Munnell, Anthony Webb and Francesca Golub-Sass.
The center calculates the NRRI based on the 2004 Survey of Consumer Finances compiled by the Federal Reserve Bank.
Around 35% of early boomers (born 1946-1954) won’t have adequate retirement income. This rises to 44% for late boomers (born 1955-1964).
The figures hold true even for boomers who work to age 65, even if they annuitize all their assets and include reverse mortgages, says the report, “Is There Really a Retirement Savings Crisis? An NRRI Analysis.”
The problem will likely only get worse, the researchers conclude. They estimate 49% of Generation Xers (born 1965-1972) are at risk of having inadequate income post-retirement.
The center defined at-risk households as those that won’t be able to maintain their pre-retirement standard of living. That calculation is based on an income- replacement rate deemed by the researchers to be adequate for retirement–a replacement ratio ranging roughly from 65% to 85% of pre-retirement income, depending on household income and marital status.
A similar Boston College study 15 years ago found just 20% of households age 51 to 61 were deemed at risk for retirement.
A number of factors have been building to increase the retirement risk for boomers, according to the researchers. These include increasing longevity, which creates longer retirements along with causes like falling Social Security income replacement rates, the shift from traditional pension plans to 401(k)s, and lower interest rates on investments, according to Munnell, who is director of the center.
Nationwide Financial Services Inc., Columbus, Ohio, sponsored the study.