Today the Bureau of Labor Statistics reported a 3.2% unemployment rate for workers ages 55 and older in August, no change from July. While the headline unemployment rate for near retirees is low, it doesn't indicate the economic fragility faced by workers aged 55-64.
Low-, middle-, and high-income near retirees are almost one-third short of the savings they need to maintain their standard of living in retirement.
ReLab's new report
using just-released government data documents that the median level of retirement savings in IRAs and 401(k)-type plans among workers ages 55-64 is $15,000. When workers who do not have any retirement savings are excluded, the median is just $92,000 - a sum that would replace only about $400 per month for the rest of a person's life.
Even with generous assumptions,1 workers in the bottom half of the earnings distribution (earning less than $40,000) are 28 percentage points below the median replacement rate -- the ratio of retirement income to preretirement income. Workers in the middle 40% are 31 percentage points short. And even workers in the top 10% (earning above $115,000 a year) face a shortfall of 29 percentage points short. One third of workers without retirement accounts will only have Social Security.
Regardless of income, many older workers face an unpalatable choice between delaying retirement or downward mobility in retirement. If forced to stay in the labor market, jobs for older workers are often low-paid
retirement coverage. For many, delaying retirement is not an option due to physical and mental limitations
and employer distaste
for older workers.
In the short term, older workers need well-paying jobs that provide pensions. In the long term, every worker needs an advanced-funded supplement to an expanded Social Security system. Guaranteed Retirement Accounts
(GRAs) are proposed as individual accounts on top of Social Security funded by contributions from employees, employers, and government throughout a worker's career. GRAs provide workers with a lifetime, consistent savings vehicle, ensuring workers can retire when they need or chose.
1 Using recently released data from the 2014 Survey of Income and Program Participation (SIPP), we compared the projected post-retirement incomes of low-, middle-, and high-income workers with retirement accounts with replacement rate targets (ratio of retirement income to preretirement income) that will permit them to maintain their preretirement standard of living. Assumptions include retiring at age 65, continued employee contributions of 6% and employer contributions of 3%, and a 4.5% real investment return.