In a report released Tuesday, CRR notes that only 20 percent of those who were between ages 51 and 61 in 1992 were at risk of falling short of money in retirement. Today, 32 percent are.This report is not a surprise. With so few people now being covered by pension plans this was to be expected. People simply do not have the available funds to put more money into 401(k) plans. I believe this situation will get even worse in the coming decades when even less people will be participants in traditional pension plans.
Why the increase? Munnell points to the shift from traditional pension plans to 401(k)s. Plus, she notes, people are living longer, and Medicare and taxes will take a bigger slice out of Social Security checks.
In another report released Tuesday, the Employee Benefit Research Institute (EBRI) and the Investment Company Institute showed that while 401(k) balances have increased, they are still low. For example, among long-tenured employees in their 50s who make between $60,000 and $80,000 a year, their median 401(k) balance in 2006 was just under $164,000.
But a 51-year old who makes $80,000 but only has $164,000 in savings would need to put away 23 percent of his salary - or close to $19,000 a year - if he wanted to retire at 65, according to savings guidelines from Ibbotson Associates. That would give him enough money, in combination with his Social Security benefits, to live on 80 percent of his pre-retirement income minus his annual 401(k) contribution.
This is an interesting article and should be read completely.