The Government Accountability Office’s 2013 Survey of Consumer Finances has revealed a rather frightening statistic: About half the U.S. population age 55 or older has no retirement savings.
The GAO report found that 48 percent of households age 55 or older have some retirement savings; 23 percent have a defined benefit plan – which typically provides a monthly payment for life — but no retirement savings; and 29 percent have no defined benefit plan or retirement savings.
What will that 29 percent live on? It’s likely that they’re counting on Social Security, which is a major gamble.
About half of U.S. households age 65 or older currently rely on Social Security for most of their income. According to a Social Security Administration report cited by Forbes, nine of 10 people age 65 or older receive some Social Security benefit.
That 65-and-up age group will grow over 50 percent between 2015 and 2030 as the Baby Boomers retire, according to U.S. Census Bureau projections.
And as Forbes notes, Social Security has been operating on billion-dollar deficits since 2010. According to Reuters, the program may fall short of fully funding disability benefits as early as next year, and unless legislative remedies are forthcoming its trust fund will be exhausted by 2033, leaving it able to cover only about three-fourths of its obligations.
Studies cited in the GAO report generally found that between one-third and two-thirds of workers were already at risk of falling short of maintaining their pre-retirement standard of living in retirement.
And that may be OK for some, to a point. Pre-retirement standards for many would have included raising kids and putting them through college. They likely included mortgages that, if they stayed put long enough, may be paid off by retirement. Expenses, in general, may be reduced.
But the math doesn’t lie. Add a looming 25 percent across-the-board reduction in benefits, and that’s more of a kick in the gut than a tightening of the belt.
Even if you’ve only got a decade or less of good working years left, take advantage of 401(k) or whatever retirement instruments you have at your disposal while you can. Because betting on Social Security is like standing on 15 when the house has an ace showing.