Study after study has painted a grim picture of retirement for today's workers. Many are well behind where they should be in terms of savings, and an alarming 21% of Americans have no retirement savings at all, according to a Northwestern Mutual survey. Couple that with the potential for a long life expectancy and the uncertainty surrounding Social Security's future, and things look dire indeed.
But a recent Employee Benefit Research Institute (EBRI) study suggests there may be a light at the end of the tunnel. The latest data from its Retirement Security Projection Model shows that the percentage of Americans estimated to run out of money in retirement has decreased by 1.7% since the last time EBRI conducted this study, in 2014. But the danger is still real for many Americans. Below I discuss the study's findings in more detail and what you can do if your retirement savings are off track.
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Two in five Americans still aren't saving enough for retirement
While retirement savings have improved slightly over the last five years, 40.6% of American households with heads of households aged 35 to 64 will run out of money in retirement, according to the EBRI study. And this could get worse.
The Social Security trust funds will be depleted by 2034, at which point Social Security will no longer be able to provide everyone who qualifies their full benefits. The government has considered several options to save the program, including reducing benefits, increasing the Social Security tax rate, reducing cost-of-living adjustments, and raising the full retirement age. No one knows what will happen yet, but it's possible that Social Security's value will decline.
If that happens, the EBRI study predicts that the percentage of Americans at risk of running out of retirement savings could rise by as much as 17% for adults aged 35 to 39, and the aggregate retirement deficit for all ages included in the study will rise by 6%. Unfortunately, there isn't anything you can do about the future of Social Security, but you can take steps now to improve your personal retirement savings.
How to get your retirement savings back on track
The first step is to estimate how much money you'll need for retirement, if you haven't already. First, estimate how long you're going to live. The average life expectancy in the U.S. is 78.6 years, but you may want to plan for longer. One in four of today's 65-year-olds will live past 90, according to the Social Security Administration, and one in 10 will live past 95. Once you have your estimated life expectancy, subtract the age you plan to retire at to determine the length of your retirement.