Retirement Savings Are Growing, But Not For Everyone

financial advisor and client

by Howard Gleckman, Immediate Past President of JCA

There is a seemingly endless debate about whether Americans have sufficient savings for retirement (see here and here). The answer is that many do. But tens of millions do not.

Overall retirement assets have grown enormously in recent years– to $36 trillion, despite a terrible stock market in 2022. But looking at total retirement plan savings, or even average 401(k) and IRA savings, misses a much more nuanced story: Much of the increase in these account balances is skewed to higher-income workers. As a result, while many near-retirees seem better prepared for the average costs of old age, including for health care and long-term care, tens of millions of others are not.

In 2022, half of workers aged 55-64 had retirement savings of $150,000 or more, while half had $150,000 or less. Savings in these defined contribution plans are critical because they represent the largest single source of financial wealth for many households. And traditional defined benefit corporate pension plans have largely faded from the scene.

The boost in overall retirement savings is good news. And it probably got even better in 2023, when the stock market more than recovered its 2022 losses. But, there is a big but.

For the lowest-income households, median retirement balances fell over the period, from $32,200 to just $25,000. And while median balances rose for the second lowest income group, the share of those workers with 401(k) plans fell sharply, from 48 percent to 38 percent.

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