William Kistler views retirement like someone tied to the tracks and watching a train coming. It’s looming and threatening, but there’s little he can do.
Kistler, a 63-year-old resident of Golden, west of Denver, has been unable to build up a nest egg for himself and his wife with his modest salary at a nonprofit. He has saved little in a 401(k) over the past decade, after spending most of his working life self-employed. That puts him far behind many wealthier Americans approaching retirement.
“There is not enough to retire with,” he said. “It’s completely frightening, to tell you the truth. And I, like a lot of people, try not to think about it too much, which is actually a problem.”
With traditional pensions becoming rarer in the private sector, and lower-paid workers less likely to have access to an employer-provided retirement plan, there is a growing gulf in the retirement savings of the wealthy and people with lower incomes.
Because retirement savings are ever more closely tied to income, the widening gulf between the rich and those with less promises to continue – and perhaps worsen – after workers reach retirement age. That is likely to put pressure on government services and lead even more Americans to work well into what is supposed to be their golden years.
Highly educated, dual-income couples tend to do better under this system. The future looks bleaker for people with less education, lower incomes or health issues, as well as for single parents, said Karen Smith, a senior fellow at the Urban Institute, a Washington think tank.
Incomes for the highest-earning 1 percent of Americans soared 31 percent from 2009 through 2012, after adjusting for inflation, according to data compiled by Emmanuel Saez, an economist at University of California, Berkeley. For everyone else, it inched up an average of 0.4 percent.
Researchers at the liberal Economic Policy Institute say households in the top fifth of income saw median retirement savings increase from $45,539 in 1989 to $160,000 in 2010 in inflation-adjusted dollars. For households in the bottom fifth, median retirement savings were down from $8,433 in 1989 to $8,000 in 2010, adjusted for inflation. The calculations did not include households without retirement savings.
The days of retirees being able to count on set monthly payments from pensions continue to fade among nongovernment workers. Only 13 percent of private-sector workers now participate in “defined benefit” plans, compared with a third of such workers in 1985. They’ve been eclipsed by “defined contribution” plans, often 401(k)s, in which employers match a portion of employee contributions.
Americans know they need to save for retirement. The trick for many is actually doing it. It’s estimated about half of private-sector workers don’t take part in a retirement plan at their current job.
