A recent analysis conducted by AARP highlights alarming patterns in retirement savings among U.S. adults. The findings indicated that 20% of people aged 50 and above lack any retirement savings, a situation that experts warn could impose a heavy strain on future taxpayers. According to David John, a senior strategic policy advisor with AARP, around 57 million private sector employees in the United States—roughly half of the workforce—do not have access to a conventional pension or a retirement saving scheme through their job.
This problem has been evident for many years. John mentions that those in their 50s or early 60s approaching retirement without adequate savings are encountering a crisis. “It’s not an immediate crisis, but it will certainly become one,” John emphasized.
If we are not among those with limited retirement resources to enhance Social Security, we will ultimately be the ones contributing taxes to support those who lacked that possibility.
In response, many states have initiated or are planning to establish state-supported retirement savings programs aimed at assisting employees who do not have access to retirement options at their workplaces.
American adults without retirement savings
For instance, California’s CalSavers program helps individuals who are unable to save for retirement through their employer. These initiatives come at no cost to small businesses, which frequently face challenges in providing retirement benefits due to financial constraints. Greg McBride, the chief financial analyst at Bankrate, noted that even in the absence of employer-sponsored plans, individuals can still set aside funds for retirement independently.
“One thing that many consumers overlook is that not having access to a retirement savings plan does not equate to being unable to save for retirement in a tax-advantaged way,” McBride explained. He pointed out that if an individual or their partner earns income, they can contribute to an Individual Retirement Account (IRA), which provides tax incentives. According to the IRS, various types of IRAs exist, such as traditional IRAs, where contributions may be tax-deductible, and Roth IRAs, where contributions are not deductible but qualified withdrawals can be tax-free.
Despite the availability of these options, McBride highlighted that many workers are not fully utilizing these accounts. In summary, the absence of retirement savings among a significant segment of the American labor force poses a potential crisis that may affect future taxpayers. Nevertheless, with appropriate initiatives and increased awareness, individuals can still take measures to secure their financial stability.
