Emerging Retirement Crisis: When Social Security Is Not Enough

Background and Purpose: Evidence suggests a growing retirement savings crisis in the United States. Due to decreasing participation in defined benefits programs and a growing reliance on defined contribution plans, the median retirement savings held by households is less than $100,000. While Social Security provides income assistance to retirees, the average monthly benefit is $1,300. Among those nearing retirement and in retirement, use of public assistance programs is increasing thus calling into question the financial health and well-being of older adults. Using retirement data collected over a 3-year period, this study examines demographic differences and trends in the perceptions and experiences of work and retirement planning and readiness in older Americans.

 Methods: Data were drawn from representative panel samples of randomly selected U.S. adults age 50 and over collected by the Associated Press-NORC Center for Public Affairs Research in 2013 (n=1024), 2016 (n=1075) and 2017 (n=1683). Respondents were queried about retirement preparedness and planning, family financial assistance during retirement, and factors influencing retirement decisions. ANOVA and chi-square tests were conducted to determine trends and demographic differences in retirement planning and decisions. The Tukey’s HSD procedure was used for post-hoc comparisons.

 Results: A significant mean difference was found on health as a reason for retiring respondents in 2013 (M=3.34, SD=1.45) and 2016 (M=3.55, SD=1.45) and those in 2013 and 2017 (M=3.66, SD=1.36). Compared to 2013 respondents, adults in 2016 and 2017 considered their health as a moderately to very important factor for retirement decisions. In 2017, there was a significant difference (χ2=45.19, p<.001) among the age groups answering yes to the question concerning borrowing from their retirement plan, with 38.5% of adults aged 50-54, 35.5% of adults aged 55-59, 31.3% of adults aged 60-64, and 20% of adults aged 65 and older. A significant difference (χ2=13.15, p=.004) was found on borrowing from a retirement plan among the race/ethnicity groups in 2017, with 25.9% of White, 26.5% of African American, and 36.2% of Hispanic. In 2017, 62.7% of the respondents reported debt as a reason for not saving for retirement. Those receiving safety net services (e.g., SNAP) reflects an increasing pattern over time, from 8.9% in 2013, 11.2% in 2016, and 19.2% in 2017.  

 Conclusions and Implications: This study shows increasing rates of unpreparedness for retirement among older Americans, particularly among adults of color. This result provides additional evidence for the effects of cumulative disadvantage, specifically related to retirement and accumulation of wealth, over the lifetime of older adults of color compared to Whites. This has contributed to an increase in the use of safety net services among older adults. The increase in safety net usage is occurring concurrently with severe funding reductions in social welfare programming. Effects of inadequate retirement savings on health and well-being are understudied areas in which social work can influence through direct practice and policy. Additionally, examining disparities in retirement preparedness and planning provides a complementary approach to the Grand Challenges for Social Work objectives of “Building financial capacity for all” and “Advancing Long and Productive Lives”.