US workers increasingly concerned about retirement finances
Americans planning for retirement are facing a number of challenges, according to a new strategy paper from The Hamilton Project think tank.
The paper reports that only half of all workers in the US are confident they will have enough money to live on when they retire. This figure is higher than it was in the immediate aftermath of the financial crisis, but still significantly lower than it was in the years 2002–2004, when it stood at around 60%.
The paper lays out a number of underlying trends that are shaping the outlook for retirees in the US. A key factor is that people are now living longer: among the current generation of 65-year-olds, 34% of women and 22% of men will live to be at least 90. In 1965, these figures were 25% and 10%, respectively.
Consequently, there are now only 4.3 people currently in work for every retiree receiving social security benefit. In 1960, the ratio was nine to one.
The Hamilton Project also highlights a number of changes to personal finances in the US, including the shift away from traditional pensions to defined-contribution pension plans. And it warned that many Americans demonstrate a lack of understanding of basic financial concepts, including compound interest and inflation.
Marek Góra has written for IZA World of Labor about redesigning pension systems in response to aging populations. He argues that: “Governments need to make pension systems more transparent and make adjustments to reduce the burden on workers, returning pension systems to a social role.”
Another approach to demographic challenges is discussed by Carol Graham in her article on late-life work and well-being. She writes that: “Given the increase in labor-saving technology and aging populations, creative solutions are necessary. Flexible retirement and work time could be part of the solution and would enhance well-being.”
Read the Hamilton Project strategy paper, Ten Economic Facts about Financial Well-Being in Retirement, here.
Redesigning pension systems by Marek Góra
Late-life work and well-being by Carol Graham
Pension reform and couples’ joint retirement decisions by Laura Hospido
The effect of early retirement schemes on youth unemployment by René Böheim