In a blog post last week, we discussed the fact that many Americans plan to work in retirement just to make ends meet. As we’ve mentioned before, though, many people won’t be able to continue working in retirement and may have to retire earlier than planned. A new report from the Schwartz Center for Economic Policy Analysis (SCEPA) indicates that many middle class families risk falling into poverty in retirement due to inadequate retirement savings.
It’s a well-documented fact that the United States is facing a retirement savings crisis. The simple fact is that many Americans are not saving enough to maintain their standard of living in retirement. Most retirement experts advise that workers should aim to replace 70 to 80 percent of their income in retirement. Most Americans will replace a significant portion of their income with Social Security benefits. However, Social Security is only supposed to serve as a floor to prevent extreme poverty in retirement; it is not supposed to replace the full amount needed for a dignified retirement. Social Security only replaces roughly 40 percent of income on average and that replacement ratio is declining.