Is This the End for Life After Work?

NEW YORK (MainStreet)—The concept of life-after-work seems to be fading fast for Americans. New research indicates that the average working-age family has set aside a mere $3,000 for retirement. Two-thirds of working households between the ages of 55 and 64 with at least one earner have retirement savings less than one times their annual income, far below what they will need to maintain their standard of living in retirement.

"The Retirement Savings Crisis: Is it Worse Than We Think?", issued by the National Institute on Retirement Security (NIRS) says that because of this low level of savings, the U.S. retirement savings gap is between $6.8 and $14.0 trillion, with lower- and middle-income Americans most at-risk.

"We wanted to broadly examine how American households are faring in relation to retirement savings targets recommended by some financial services firms," said Nari Rhee, NIRS manager of research. "We used the Federal Reserve's Survey of Consumer Finances to analyze retirement plan participation, savings, and overall assets of all U.S. households age 25 to 64, not just those with retirement account assets. This is important because some 45%, or 38 million working-age households, do not have any retirement account assets."

Aon Hewitt and Fidelity Investments have estimated that to maintain the same standard of living in retirement, the average household needs to replace about 85% of pre-retirement income. The NIRS study shows a drastic short-fall for most Americans.

"Our findings confirm that the American Dream of retiring comfortably after a lifetime of work will be impossible for many," Rhee added. "Based on 401(k)–type account and IRA balances alone, some 92% of working households do not meet conservative retirement savings targets for their age and income. Even when counting their entire net worth, 65% still fall short."