Median Retirement Balance Is $3,000 for All Working-Age Households

NIRS studied savings data to find how many households met these benchmarks based on several measures. When looking at just the retirement assets of a household, including workplace plans, IRAs and pensions, 90% did not meet the recommended benchmark. Looking at total financial assets, which includes retirement assets as well as checking and savings accounts, stocks and bonds, and life insurance policies, 84% of households fall short of the benchmark. Even with the most generous measure of total net worth, which adds home equity to the count, 65% of households fall short. Furthermore, the report noted that some factors that contribute to net worth, like college funds or medical savings, aren't intended to serve as retirement income.

"The current retirement saving system is not working for most households," Nari Rhee, manager of research for NIRS and author of the report, said on the webinar. "The truth is, many will work longer, but the gap is so big, families won't be able to fill it on their own."

To help improve retirement outcomes for Americans, Rhee recommended three strategies: strengthen Social Security; improve access to retirement plans, especially among low- and middle-wage workers; and help low-wage workers save.

"Despite the tenor of policy debates in D.C., surveys have found public support" for protecting Social Security, Rhee said. NIRS referred to a report by the National Academy of Social Insurance found "strong public support" for expanding Social Security benefits and increasing revenues in order to continue the system. Pew Research Center found in April that more than half of Americans said keeping Social Security and Medicare benefits at their current levels was more important than cutting the deficit.

To improve access to retirement plans, especially among low- and middle-wage workers and small business employees where access is lowest, Rhee suggested looking at products like automatic IRAs and hybrid models like those suggested by Sen. Tom Harkin.

With automatic IRAs, employers who do not provide a retirement plan would automatically enroll their workers in an IRA with a default contribution rate. Individuals could opt-out, and investment risk and funding the IRA would be their own responsibility, although some proposals feature risk sharing and other pension-like benefits, according to the report. The proposal put forth by Sen. Harkin for USA Retirement Funds combines DC and DB features like risk sharing, pooled investments and lifetime income that could bridge the gap in the current workplace retirement saving system.

There's also some state-level action to increase retirement security, Rhee said, like a bill passed in California last year that would create an automatic IRA with some hybrid features.

Finally, Americans simply need to save more. "The majority of American households will not be able to maintain their standard of income" when they retire, Rhee said. Low-income households are in particular need of help saving. Because they have low marginal income tax rates, they're less likely to take advantage of tax deductions for contributions to retirement plans, according to the report.

The Saver's Credit, which was enacted in 2001, reduces the income tax liability on the first $2,000 of contributions to a qualified account by between 10% and 50%. Those with the lowest incomes can take a higher credit. However, the Saver's Credit phases out for incomes higher than $29,500. NIRS found the average credit in 2006 was just $172. Rhee suggested expanding the Saver's Credit to give low-income households more incentive to save.

"You don't know you're in a hole until you start to measure," Oakley concluded. "These are estimates—blunt measurements—but when you look at what we need, we're about $11 trillion short. Publicly held debt is roughly the same size as what we as individuals need to save for retirement."

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Check out Americans Would Pay Higher Taxes to Preserve Social Security on AdvisorOne.