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Jill On Money: Two-tiered retirement

Jill Schlesinger on

Are Americans prepared for retirement? It depends on who you ask.

The Alliance for Lifetime Income (ALI) released a study with an eye-catching headline: Two-thirds of peak Baby Boomers are not financially prepared for retirement.

However, results of EBRI’s 2024 Retirement Confidence Survey (RCS) found “two-thirds of the workers and three-fourths of the retirees are very or somewhat confident about having enough money to live comfortably in retirement.”

Two retirement surveys, two different results?

Not so fast. The ALI survey crunches retirement numbers while EBRI asks how we feel about our retirement readiness, and there can be a chasm between the two.

ALI focused on “Peak Boomers,” defined as those Americans who will turn 65 between 2024 and 2030, of which there are 30.4 million. According to the study, more than half of these soon-to-be retirees will rely primarily on Social Security for income, which was intended to replace about 40 percent of annual pre-retirement earnings.

 

ALI went deeper to determine if assets accumulated (the median retirement savings for Peak Boomers is $225,000) would augment Social Security and last up to 20 or more years in retirement. The answer is that two-thirds of Peak Boomers “will be challenged to maintain their lifestyles in retirement.”

Conversely, the RCS asked people how confident they felt in their ability to live comfortably throughout their retirement. While 68% may feel confident, only about half have run the numbers. If they did, the results might be similar to ALI, because “a sizable percentage of workers say they have very little or no money in savings and investments.”

Forty-seven percent report that the total value of their savings and investments, excluding the value of their primary home, is less than $100,000. (RCS relies on workers to self-report, EBRI relies on Federal Reserve data.)

Ultimately, the two surveys may be closer than their respective headlines would indicate. The notion that millions of Americans are facing an uncertain retirement reality is the focus of a new book by economist and author Teresa Ghilarducci. In Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy, Ghilarducci dives into the numbers and finds a two-tiered retirement system, where only “21% of Americans aged 62-70 have enough money to maintain their standard of living in retirement.” Of the 79%, “51% are retired but can’t maintain their pre-retirement standard of living. And the rest, 28%, are working and cannot afford to retire.”

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