For a majority of  low-income and middle-class Americans, “retirement” won’t mean relaxation – it will mean more work. Photos: Claus Rebler (left), Surat Lozowick (right)

In our last post outlining Nari Rhee’s new report on the impending retirement crisis, we outlined how we are facing a collective multi-trillion dollar retirement gap between what has been saved and what needs to be saved for a dignified and comfortable retirement. That “gap”, however, isn’t shared equally among all Americans.

Retirement insecurity is primarily faced by the nation’s poor and lower-middle class. According to Rhee’s report, “households that do own retirement accounts have significantly higher income and wealth – more than double the income and five times the non-retirement assets – that households that do not own a retirement account.”

Households with a retirement account have a median income of $76,238, according to the report, compared to $30,495 among households without an account. Rhee writes that 89 percent of those in the top income quartile have retirement assets, whereas 72 percent have assets in the second  quartile, 51 percent in the third quartile, and 26 percent in the fourth (lowest) quartile, respectively.

While it makes sense that poorer Americans will have less to save for retirement, and will have a greater percentage of their post-retirement income supplemented by Social Security, it does not negate the need for workers of all incomes to save.  Likewise, Rhee writes that while Social Security will contribute to more income for low-income retirees, those benefits are offset by the fact that other costs decrease post-retirement (such as income taxes, savings, and work related expenses) for wealthier workers more often than for poorer workers.

Rhee also notes the difficulties low-income workers have in being offered a retirement plan in the first place. They, like part-time workers and small-business employees, are at a relative disadvantage in being offered retirement plans, particularly because many employers believe they either would not want to participate or offering would be too costly. In fact, according to a survey last year by the Employee Benefit Research Institution, only 23.7% of the nation’s 14.5 million workers aged 21-64 making less than $10,000 per year were offered retirement plans.  Similarly, 46.9% of those earning between $20,000-30,000 per year were offered plans, compared to 73.1% of those making $75,000 or more.

Workers with lower incomes are systematically being pushed out of the retirement savings game, and Social Security won’t be enough to keep even the most frugal afloat. Ultimately, Rhee argues that public policy “can play a critical role in putting all Americans on a path toward a secure retirement.” In our next post, we will outline her recommendations as well as what EOI has and is working on to ensure everybody has the ability to save for the long term.

By EOI Intern Bill Dow