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Almost Half of America Doesn’t Have Enough to Retire

A Morningstar report found that 45% of Americans will experience retirement-funding shortfalls, motivating some to work into their 70s.

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Who needs quality time with the grandkids anyway?

People typically try to exit the workforce around their early to mid-60s and then coast on the savings they’ve built up for decades. But those goalposts are moving — about 45% of Americans will experience retirement funding shortfalls, according to a Morningstar simulation of spending data. 

“Many Americans don’t sit down to think about retirement until they are relatively close to retirement,” Morningstar director of retirement studies and report author Spencer Look said in an email. This late-stage scramble can drive some to work until they’re 70, which can significantly reduce funding woes in retirement. Only 28% of those who work into their 70s are expected to encounter retirement issues, the report said. 

Working Late?

Many macroeconomic and personal decisions contribute to poor retirement savings, Look said. Just a handful include stagnant wages, the general shift from pensions to 401(k)s, inflation and high interest rates, and long-term medical care expenses. The report also found:

  • Public sector workers are the most prepared for retirement because of stable pensions. Those in the finance, insurance, and real estate sectors are also at lower risk due to higher median incomes.
  • Agricultural workers are the most likely to face retirement shortfalls.
  • Single women are particularly vulnerable, with 55% expected to encounter funding setbacks.

Washington Woes: Government assistance is in jeopardy, too. Today, about 68 million people, or 1 in 5 Americans, receive a Social Security check each month, but the money going into those benefits is at risk of running dry. The Congressional Budget Office recently estimated that the Old-Age and Survivors Insurance Trust Fund will “decline to zero” by fiscal year 2033, meaning by 2035, the value of monthly checks will decline by 23%. 

Automate It: However, there are systems to help the average Joe and Josephine save more. Starting next year, employers will be required to automatically enroll employees in 401(k) and 403(b) plans as part of the SECURE 2.0 Act. Employees can still opt out if they choose.