For many Americans, the ideal of a pleasant retirement is becoming increasingly impossible to realize, and for some, it may already be fading.
According to a recent LendingTree survey, the average retiree in one of the top 100 U.S. metro regions need $71,407 per year before taxes to fund basic costs. However, the typical Social Security income in these places is only $21,500, accounting for less than 30% of that amount.
The gap between what seniors want and need and what they have is growing, and experts believe the problem will remain throughout generations.
Another recent survey by investment banking firm D.A. Davidson, which polled 1,008 U.S. people aged 50 and over, revealed that 41 percent stated they would be unable to maintain the retirement lifestyle they want. In recent years, older Americans have been staying in the employment for longer periods of time: according to a 2023 Pew Research Center survey, around one in every five Americans aged 65 and up were still working at the time, nearly twice as many as 35 years previously.
“For many, [retirement] will never happen,” said Matt Schulz, LendingTree’s top consumer finance analyst and author of Ask Questions, Save Money, Earn More. “Most aren’t fortunate enough to have a seven-figure nest egg or a pension to lean on.”
Instead, according to Schulz, retirees frequently face restricted income, mounting debt, and retirement funds with dangerously low balances.
“It’s all going to add up to a challenging situation for retirees and their loved ones in the next 15 to 20 years.”
The Vanishing Pension
So, how did retirement become such a daunting proposition for today’s Americans?
Financial analysts believe that the transition from traditional pensions to 401(k) plans and other self-funded savings choices was a significant move. This move shifted responsibility—and risk—for retirement planning from businesses to individuals.
“Changing from pensions to 401(k)s is like handing someone keys but not teaching them how to drive,” Bill Harris, former CEO of TurboTax and PayPal and founder of Personal Capital, told Newsweek. “Combine that with inconsistent savings habits, and you get a widespread readiness gap.”
Marcus Sturdivant Sr., a senior adviser at The ABC Squared, shares that sentiment.
“This is the generation that had pensions or employee-sponsored retirements, which were the burden of the company to fulfill,” stated the man. “Now the focus is on the individual to save…and the advice from already retired parents didn’t translate to this new system.”
As a result, Sturdivant cautions, many Americans either did not save enough or didn’t know how.
“Flippant attitudes to saving, a culture of decreasing attention spans, and life just sneaking up on people, and they wake up one day closer to retirement age than their early years of life,” according to him. “We lost perspective of short-term sacrifice for long-term gains; instant gratification is winning.”
Can (and Should) Social Security Pick Up the Pieces?
With personal savings depleted, many Americans have resorted to Social Security to supplement their retirement income. However, experts agree that the program was never intended to cover the total cost of retirement.
“Social Security was not designed to cover your entire retirement but to supplement it,” he stated.
However, for millions, that supplement has been their primary source of retirement income. According to a recent survey conducted by The Senior Citizens League, more than one-third (39%) of Americans rely only on Social Security for retirement income.
As pressure rises to solve the shortfall, pleas to strengthen the program become louder.
“In principle, yes,” Chad Harmer, founder and CIO of Harmer Wealth Management, told Newsweek when asked if benefits should be expanded. “A program that was designed as a floor has slowly become the primary pillar of support for millions.”
