At the end of a recent conference, the perennial question arose—again—whether the United States is facing a retirement crisis.
I have never been married to the word ‘crisis’, but the National Pension Risk Index (NRRI) suggests that about half of current working-age households are at risk of not being able to maintain their standard of living after retirement. While the NRRI relies on some specific assumptions, anything close to 50% at risk seems like a serious problem to me.
The conference participant who reinforces the stated vision without crisis a questionnaire prepared by the Association of Actuaries. That’s a good and respectable group, so because I never gave their research the careful look it deserves, I took the time to read through the 143-page document. My premise was that if the SOA documented “no problem,” I would give in and plan a nice six months post-pandemic in Paris.
The 2019 online survey of approximately 1061 pre-retirees and 1,255 retirees born between 1938 and 1973 was conducted in June 2019 by Greenwald & Associates. This study was the 10th in a series documenting the retirement concerns and preparedness of older Americans. The authors acknowledge that the sample is not random, but rather consists of people who are willing to complete a 20-minute internet survey. They rebalance the results to match the March 2019 age, gender, education and household targets Current Population Screening.
The results for 2019 were significantly improved from the previous survey in 2017 for both retirees and pre-pensioners. In fact, the majority of retirees surveyed are just as good or better off financially than they expected before retirement. The authors note that this finding is difficult to reconcile with the fact that retirees retired much earlier than pre-retirees expected to retire, and significantly more people expect to work post-retirement than in reality. .
So here are the results of the 2019 survey when respondents were asked about maintaining their standard of living or running out of savings (see Table 1). Yes, it is true that retirees were not as concerned as pre-retired people (a result consistent with previous surveys), but about 40% of retirees were either very concerned or somewhat concerned that they would not be able to maintain their standard of living or that they would run out of money.
And 2019 was a great year in terms of response – a decade after the last recession, the stock market was booming and nobody knew about COVID-19. While the authors urge caution when comparing online 2019 results to telephone surveys from 2011 or earlier, the 2019 results are still the lowest of any recent survey (see Figure 1).
Can those who see a problem and those who don’t really argue about whether 40%, 45% or 50% are at risk of not living their lifestyle or running out of money? In all of those situations, a huge number of Americans feel vulnerable when they retire. That is not an acceptable result.