Update on the Retirement Crisis

More Americans aren’t financially prepared for retirement. I’m sure that doesn’t come as surprising news to you. But it’s the conclusion from two reports that are updated annually. The Center for Retirement Research at Boston University publishes its National Retirement Risk Index, and the Employee Benefits Research Institute publishes its Retirement Readiness Rating. You can read a summary of both reports here.

The good news is none of that affects your status for retirement. The reports are based on projections and use data of average household wealth and similar factors. As always, I urge people to avoid averages, ballpark estimates, and rules of thumb. Focus on your own goals, income, and assets. You’ll probably find that you’re better off than the averages and the hypothetical families profiled in such studies.

Do the math: According to an EBRI survey conducted last year, 66% of workers have saved less than $50,000 for their retirement. And 28% have saved less than $1,000. Good luck with that.

The most alarming news, though, is in the fine print. Even these bleak numbers are based on the most rosy financial scenarios. EBRI assumed no changes in Social Security or Medicare. It also assumed wacky financial returns: It estimated people would earn about 8% above inflation each year on their stocks and about 2% above inflation on their bonds — net of fees!