In what probably sounds like a broken record, a new report suggests that most of those 55 and older aren’t ‘ever’ going to be able to retire. But the exact opposite is the case for those in the minority.
“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),” a new U.S. Government Accountability Office report highlights.
“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.”
The 49-page study was done, in part, because the number of people aged 65 and older is expected to grow by over 50 per cent between today and 2030. With the shift from defined benefit to defined contribution pension plans combined with people living older and the uncertainty surrounding the very survival of Social Security, the GAO was asked to study the financial status of those approaching retirement or already in it.
“The challenge with this type of study is that it falls on deaf ears,” says RBC DS advisor Greg Hall. “I speak with people every week who sincerely consider the lottery as a viable retirement strategy. As an advisor, I try to counsel to the point that time marches by and we can’t rely on our government to support us in retirement in the lifestyle that we enjoyed while working…that’s up to us.”
The findings aren’t good and they’re especially discouraging for those leading up to retirement, aged 55 to 64.
“About 55 percent of households age 55-64 have less than $25,000 in retirement savings, including 41 percent who have zero,” the GAO report finds. “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.”
Perhaps the most telling stat from the GAO study when it comes to the 55-64 age group is the difference in median income, net worth, and home ownership between those who do have retirement savings and those that don’t.
For example, those 55-64 that don’t have any retirement savings (32% do have defined benefit plans of some sort) have a net worth of just $21,000 compared to $337,000 for those that do. When it comes to median income those in the don’t camp make just $26,000, $60,000 less than those that do, a huge difference that over a lengthy period of time that makes a big difference in the overall financial health of a household.
“While most people 65 and over have confidence in their retirement security, levels of confidence among people approaching retirement age are lower,” states the GAO report. “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. On the other hand just over half (52 percent) of people age 55-64 say retirement income they expect or receive will be enough to maintain living standards.”