A generation ago, middle-class families were able to put away enough money during their working years to make it through their later years with dignity. On average, they saved about 11 percent of their take-home pay while working. Many paid off their homes, got rid of all their debts and retired with strong pensions from their employers. And where pensions, savings and investments fell short, they could rely on Social Security to make up the difference.
That was the story a generation ago, but since that time, the retirement landscape has shifted dramatically against our families.
Among working families on the verge of retirement, about a third have no retirement savings of any kind, and another third have total savings that are less than their annual income. Many seniors have seen their housing wealth shrink, as well. According to AARP, in 2012, one out of every seven older homeowners was paying down a mortgage that was higher than the value of their house.
And just as they need to rely more than ever on employer support, employers are withdrawing from their traditional role in helping provide a secure retirement. Two decades ago, more than a third of all private-sector workers — 35 percent — had traditional, defined benefit pensions — pensions that guaranteed a certain monthly payment that retirees knew they could depend on. Today, only 18 percent of private-sector workers have defined benefit pensions. Employers have replaced guaranteed retirement income with savings plans, like 401(k) plans, that leave the retiree at the mercy of the market, and, sometimes, at the mercy of dubious investment products. These plans often fall short of what retirees need, and nearly half of all American workers don’t even have access to those limited plans. This leaves more than 44 million workers without access to a workplace retirement savings plan.