Half of U.S. Households Won’t Have Sufficient Income to Retire

An ongoing analysis of Americans’ retirement readiness showed a slight improvement in 2016, but the results still reveal that half will find themselves short of their golden-year goals.

The National Retirement Risk Index (NRRI) dropped from 52% to 50% between 2013 and 2016, according to the most recent calculation from the Center for Retirement Research at Boston College — indicating that exactly half of homeowners will end their careers with at least 10% less than the amount that would fund a comfortable replacement income.

While that represents a gain in the share of households that aren’t at risk, the researchers — center director Alicia Munnell, senior research advisor Wenliang Hou, and associate director for research Geoffrey Sanzenbacher — note that the findings aren’t cause for celebration.


“The bottom line is that half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living, even if they work to age 65 and annuitize all their financial assets, including the receipts from a reverse mortgage on their homes,” the authors wrote. “This analysis clearly confirms that many of today’s workers need to save more and/or work longer to achieve a secure retirement.”

Rising home prices made the most prominent positive contribution, a reflection of the home as most soon-to-be-retirees’ most valuable asset. That gain was enough to offset some of the negative trends from 2013 to 2016, including the gradual increase of the full Social Security retirement age from 65 to 67 and drops in interest rates.

The researchers also pointed to recent changes to the federally backed reverse mortgage program, which generally lowered the amount of principal that borrowers can access — though they noted that the effect was minimal.

“This effect increased the percentage of households at risk, but its impact was slightly offset by the decline in interest rates, which raised the amount of home equity that can be borrowed,” they observed. “The net impact on the NRRI from these changes is small.”

The NRRI takes into account data from the Federal Reserve’s 2016 Survey of Consumer Finances, as well as other estimates of household wealth such as Social Security benefits and savings.

The 2016 numbers mark the second consecutive decline after a peak of 53% in 2010; for comparison, the proportion of Americans considered at risk was only 31% when the index was first calculated in 1983.

Read the full report at the Center for Retirement Research.

Written by Alex Spanko

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  • There are many factors that have created the scenario outlined in this article in today’s age for seniors.

    Social security has not kept up with the “True” cost of living, in fact it is sad what has happened to social security for our seniors.

    Many seniors have lost a great deal of money in there 401-K’s and I am not talking about over the past couple of years, I am going back to when many seniors retired.

    Many seniors lost there jobs sooner than they expected, due to either companies going out of business or companies cutting back their employment staff. Keep in mind, I am not talking present day but I am going some few years ago.

    True, many seniors did not plan well, this is a lot of the cause for seniors not being in a financial position to retire!

    However, there is more equity in the hands of senior homeowners than ever before, this can be the savior for many of our seniors. Here is where we come into play. We need to reach out, find these seniors that have plenty of equity in there homes. Equity that can be released to help meet their needs to be able to survive financially.

    This is an area we need to capitalize on and do our job as well as meeting our responsibility to these seniors in need. Many seniors have an asset that they are not aware of that can save their day!

    John A. Smaldone

    • Yet does that message work? We have played that tune for several decades to only see ongoing stagnation with little evidence of change any time soon.

      We need to seek out the new and lenders need to forge forward into more extensively marketing research and development.

      Today we seem lost in changes, not focusing on the cure we offer. We need to get away from equity and the old message of equity release (magic out of the hat). Today’s senior on average is better educated than their parents.

      Originator education is stale, i.e., the education of the originator. Rather than seeing the HECM as a financial product with many applications, we present it as a tool or reduction to home equity. We have in many ways lost sight of the holistic approach so many claimed to advance. Few even understand what holistic means in the context of senior retirement.

      Yes, our product has had sufficient changes but perhaps it is time we know enough about the product and its various applications that we can attract those with a vision to recommend us and our products. We are still too much in the begging mode.

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