The other day I was speaking with a reporter about Americans’ level of retirement preparation. Usually I touch on data on retirement plan participation, average contribution rates, retirement plan assets and average retirement ages – all of which have gone up.
But this time I asked a more straightforward question:
What share of current retirees do you think would describe their own financial situation in near-crisis terms? Specifically, what percentage of Americans 65 and over rate their financial security a 1 on a scale of 1 to 4, with a value of one denoting “Finding it hard to get by”?
This reporter, who I think knows the issue pretty well, hesitated at first but then answered, “About 33 percent?”
And then came the idea: I set up a Twitter poll asking my followers how they think current retirees would answer that question. Now, this isn’t a scientific nationally-representative sample. But I’m a retirement wonk and much of my Twitter circle works in, reports on or otherwise follows retirement issues. If anything, this group knows more than the average about Americans’ retirement security.
After several days online and 400 responses, here what I got:
- 10% of my respondents thought that between 0 and 10% of retirees say they’re “finding hard to get by.”
- Another 19% guessed that between 11 and 20% of retirees placed themselves in that lowest category of financial security.
- Eighteen percent guessed it was between 21% and 30%.
- And the biggest group, 53% of the total, guessed that 31% or more of current retirees rated their financial security a 1 on a 4-scale.
All of this would be a let-down if I didn’t actually have an answer. But I do, courtesy of the Federal Reserve’s Survey of Household Economics and Decisionmaking. Each year from 2012 through 2017, the Fed has asked thousands of Americans
“Overall, which one of the following best describes how well you are managing financially?”
In addition to the first category of “Finding it hard to get by,” values of 2 through 4 represent “Just getting by,” “Doing okay” and “Living comfortably,” respectively. I merged the 2012 through 2017 data to boost the sample sizes, giving me 7,224 respondents aged 65 and over.
And here’s the answer: not 30% or more; not between 20 and 30%; and not even between 10 and 20%. The actual share of retirees who rate their financial security a one on a four-scale, is 5.6%. Yes, barely one-in-20 current retirees say they’re “having a hard time getting by.”
Even if we look to groups who we’d expect to be having a very difficult time in retirement, such as minorities or those with less education, the story is similar. Among African-American retirees only 4.6% say they’re having a hard time getting by; among Hispanics, it’s just 7.3%. Likewise, among retirees who lack even a high school education, only 14% say they’re having a hard time getting by financially. Regionally, New England retirees appear to be the most secure, with only 3.4% having a hard time financially. The East South Central region, made up of Kentucky, Tennessee, Mississippi and Alabama, has the least financially secure retirees. Yet only 8% of these seniors rate their retirements a one on a four-scale.
In fact, in every region of the country retirees rate their financial security higher than that of working-Americans, the Fed data says.
You could look in other surveys and find very similar results. According to Gallup, nearly 8-in-10 retirees say they have enough money, not merely to survive, but to “live comfortably.” In the Health and Retirement Study, 78 percent of retirees describe their retirement as either the same or better than their pre-retirement years, up from only 65 percent in 1992. Likewise, in the Federal Reserve’s Survey of Consumer Finances, 75 percent of age 65+ Americans in 2016 reported having an income sufficient to at least enough to maintain their standard of living, versus only 61 percent of retirees in 1992. In a 2017 Vanguard survey, 54 percent of retirees said they thought America as a whole faced a “retirement crisis.” But only 4 percent of retirees described their own financial situation as a “crisis.”
The fact is that the vast majority of U.S. retirees are doing well: their incomes are rising, poverty is falling and when asked by pollsters, retirees’ opinions reflect these facts. By and large, the U.S. retirement system is working. And yet almost nothing in media reporting of Americans’ retirement savings reflects these successes.
But what does this mean for the future? Could retirement income adequacy go into a tailspin? I guess it’s possible, though the fact that more Americans are saving than in the past and that total retirement plan assets have skyrocketed points against that outcome.
But these survey results tell us that, whatever the challenges facing future retirees, we’re starting from a very good place. Retirement income adequacy would have to fall a lot before anything like a retirement crisis were on the horizon.