Retirement Crisis Looms: Millions of US Workers Have Zero Savings


In 2019, only one in ten low-income employees among ages of 51 and 64 had savings for retirement, a significant decline from 2007, when one in five low-income workers had retirement savings, according to a recent report from the US Government Accountability Office. In addition, the investigation discloses that disparities between races in retirement savings remain, uncovering that white households were more inclined to have money saved and had nearly twice the median balance of families of all other races.

Nearly 70% of Americans intend to retire, but 42% of those who do not believe they will do so believe they will never have enough savings. However, to the GAO and Ghilarducci, the massive decline in retirement savings within millions of Americans is primarily attributable to two factors: expanding inequality in earnings and a tax system that provides greater savings advantages to the affluent.

Ghilarducci noted that retirement savings do not originate from inheritances or gifts, but rather from earnings. Consequently, when there is a hiatus in wage growth, there will be a gap in the formation of retirement assets. The study analyzed data from the Federal Reserve’s Survey of Consumer Finances and other sources to conclude that low-income workers had median annual earnings of approximately $19,100, while high-income workers reported median annual earnings of $282,000.

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Lingering Income Inequality and Retirement Struggles

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While the economy has recovered in many ways in the two decades since the Great Recession, the report indicates that household incomes have increased only marginally and income inequality has continued to grow. According to reports, the problem is not limited to the United States. Along with the wage disparity, the US tax system has hampered the average worker’s retirement plan, according to experts.

Congress is worried, according to the GAO report, that state tax incentives for employees to save in tax-preferred retirement accounts predominantly benefit more prosperous workers and do little to help those with lower incomes save for retirement. The GAO found that the highest-income households receive approximately 60% of the tax benefits from retirement accounts, while the lowest-income Americans receive 5%. The proportion of middle-income households with retirement accounts remained roughly constant between 2007 and 2019, but the median account balance decreased from $86,800 to $64,300, according to the analysis.  

The GOA report is consistent with recent US Census data indicating that seniors are the only age category experiencing an increase in poverty rates. 55% of senior citizens in the United States are attempting to subsist on less than $25,000 annually, according to the Federal Reserve.

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Source: New York Post, CBS News

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