Half of working-age households in the U.S. were on track in 2016 to be able to maintain their standard of living in retirement, according to the National Retirement Risk Index report out this month from the Center for Retirement Research at Boston College. Thanks mainly to rising home values, that’s better than in 2010 or 2013. But it still means that half of working-age households aren’t prepared for retirement, up from just 30.4% in 1989.

The Center for Retirement Research calculates these percentages based on data from the Federal Reserve’s triennial Survey of Consumer Finances, the 2016 edition of which was released in September. They come up with target income replacement rates based on certain household characteristics (own or rent, single or not, two earners or one, etc.), then estimate how many of the households in the survey are saving enough and can expect a big enough Social Security and/or pension payment to meet that target if the workers in those households retire at 65.

(Related: Baby Boomers Will Live Long but Might Not Prosper)

There’s been some debate over whether these target income replacement rates are too high: In 2014, American Enterprise Institute resident scholar Andrew Biggs and veteran pension consultant Sylvester Schieber argued that they were, Center for Retirement Research director Alicia Munnell explained why she was pretty sure they weren’t, and Biggs and Schieber replied with further arguments for why they were.

There’s more discussion of the issue in the new report, and if you want to get deep into some interesting actuarial wonkery, I recommend reading the whole exchange. After reading through all of it myself, though, I still don’t know exactly what percentage of American workers is unprepared for retirement. In 2015, the Government Accountability Office summed up the current state of knowledge as “studies generally found about one-third to two-thirds of workers are at risk of falling short.”What’s clear from the National Retirement Risk Index, though, is that when consistent standards are applied to Survey of Consumer Finances data going back to 1983, the percentage of Americans who don’t meet the retirement-preparedness minimum has risen a lot. Why is that? I asked Munnell, and got back this accounting of the contributing factors going back to 2004:

In calculating the index, the Center for Retirement Research assumes that when they hit 65, homeowners will take out reverse mortgages (where the bank pays you) and those with money in 401(k)s, individual retirement accounts, and other savings and investment accounts will buy inflation-indexed annuities with it. Most Americans don’t do either of these things, of course, but many should, and these methods create income estimates that can be combined with Social Security and/or pension income to give a fair picture of a household’s potential retirement income.

The annuity rates are calculated using an estimate of real interest rates derived from 10-year Treasury yields and Federal Reserve inflation expectations, and mortality tables provided by the Social Security administration. Lower real interest rates (which imply lower real investment returns) and longer lifespans mean that annuity providers would be willing offer less in annual income for a given lump sum. And even if you don’t buy an annuity, both those factors will of course play a big role in determining whether your retirement savings will be adequate to see you through.

Calendar (Image: Thinkstock)

(Image: Thinkstock)

Much attention has been focused (in this column and elsewhere) on the impact of the shift from defined-benefit pensions to defined-contribution 401(k)s in making retirement in the U.S. more complex and possibly less secure. As is apparent from the above chart, the decline in defined-benefit pensions is in fact the single biggest contributor to the rise in retirement risk since 2004, and it surely figures at or near the top of the list of contributors to the larger rise since the late 1980s. But after reading “Falling Short: The Coming Retirement Crisis,” the excellent layman’s guide to the issue published by Munnell, her Center for Retirement Research colleague Andrew Eschtruth and legendary investing consultant Charley Ellis in 2014, it’s hard not to fixate on something else as the real chief cause for the rise in retirement risk:

Yes, we’re living longer. And even as overall life expectancy has taken an unexpected hit in the U.S. in recent years because of the opioid epidemic and other issues, life expectancy at 65 has kept rising. As of 2016 it was age 83 for men and 85.6 for women, according to a report issued last month by the Centers for Disease Control and Prevention.

As already described, this rise in life expectancy figures directly into the National Retirement Risk Index via the annuity rate calculations. But it’s also a major reason corporations have stepped away from providing defined-benefit pensions and retiree health care, and is the major reason Congress voted in 1983 to slowly shift the full retirement age used in calculating Social Security benefits from 65 to 67. Along with lower birth rates, it may also be contributing to declines in real interest rates as the aging of the population depresses prospects for economic growth.

Apart from all that, of course, it’s also great news. We’re living longer! And as Ellis, Munnell and Eschtruth write in their book, there is a straightforward way to address the challenges this poses:

By and large, those who continue to work beyond their mid-sixties should have a reasonably comfortable retirement.

For me personally, this is reassuring. I do work that I enjoy that isn’t physically demanding and that I can easily envision continuing in some altered form well past 65. I’ve read “The 100-Year Life,” Lynda Gratton and Andrew Scott’s book about structuring four-and five-stage career trajectories that allow you to keep working happily into your late 80s, and I’m mostly down with that idea.

While working that long is probably too ambitious for most people just yet, the percentage of Americans staying in the labor force past age 65 has been rising since the early 1990s and is higher in the U.S. than in most other wealthy countries. It’s a key reason the current group of 65-plussers in the U.S. appears to be at least as well off as previous generations and comes off better than OK in international comparisons as well.

But not everyone can work past 65! Those who do physical work may have to stop well before that, and various ailments will trip up lots of others. What’s more, if your job doesn’t pay well, you’re much less likely to live long past 65 anyway.

The life-expectancy gap between high earners and low earners is large and growing in the U.S., which raises all sorts of new questions about what a fair retirement system should look like. Among other things, this gap is increasingly canceling out the progressivity of Social Security: Low earners get a higher percentage of their income replaced than high earners but collect benefits for fewer years because they don’t live as long.

So any solution to the “coming retirement crisis” is going to have to be different for people in different income groups. For a lot of us, it will just mean working longer. But for a lot us, it can’t.

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