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Only a few of us are saving enough for retirement. A 2017 survey by the Financial Industry Regulatory Authority (FINRA) of 2,000 adults found that only 31 percent of us have savings accounts separate from tax-exempt savings. Another 34 percent of adults participate in employer-based retirement accounts, primarily 401(k)s which allow participants to delay paying tax on their income from the savings accounts. However 35 percent of American adults have no savings accounts at all.

35 percent of American adults have no savings accounts at all.

Similar data from the Employee Benefit Retirement Institute breaks down the data for the workforce. One-third of the workforce (33 percent) participates in employer-sponsored defined contribution pension plans, such as 401(k) plans and Individual Retirement Accounts (IRAs) that rely on the employee to determine how much they will contribute and how it will be invested. Another six percent of workers are self-employed and have their own savings plans for retirement. Only two percent of the workforce relies entirely on defined benefit pension plans of the type that were commonly found in large corporations in the 1950’s in America. Ours is an era of heightened personal responsibility for our financial futures. However our era is also one where almost half (48 percent) of the workforce has nothing more than the minimal support of Social Security, if they have even that support.

Half of the workforce relies entirely on the minimal support of Social Security monthly payments.

How We Finance Retirement

However FINRA found that not all ethnic groups save at the same rate. The 2015 survey noted that as many as 36 percent of Caucasian households owned investment accounts (separate from the tax-advantaged accounts) but only 25 percent of Hispanic households and 22 percent of African-American households had similar accounts apart from 401(k)s and Individual Retirement Accounts (IRAs).

The dependency on Social Security may be more extensive that initially apparent. In 2012, Jack VanDerhei of the Employee Benefit Research Institute found that for households over the age of 65 years, Social Security provided almost half (49 percent) of family income. This was not limited to low-income households. Even those in the top 20 percent of the senior population relied on Social Security for one-fifth of their annual income. The bottom 20 percent counted on Social Security for a full two-thirds of their household income.

Unfortunately, the system has not worked well for most workers. Less than one-third of workers contribute to a 401(k) plan. A 2012 study by Michael Gideon and Joshua Mitchell of W-2 tax filings of 155 million American workers found that four out of five (79 percent) employees work for a company that offers a 401(k) plan but less than half of workers (41 percent) sign up for the plan. If small businesses are included, it is estimated that only 14 percent of all employers even offer 401(k) plans.

Only one in seven employers even offer 401(k) retirement plans.

However even among those with savings accounts, almost three-quarters (71 percent) had fewer than $100,000 in total savings. This represented less than two years of spending for the household at the median (average) level of income in America. The 2013 Survey of Consumer Finances by the U.S. Federal Reserve Board found that among working households aged 55 to 64 and holding a 401(k) or IRA, median investments was only $111,000 — or two years’ income for households at the median level of earnings.

Of those with 401(k) plans or IRAs savings plans, average savings would only cover two years of spending.

Estimates vary but all are discouraging. The National Institute on Retirement Security estimated that as of 2013, only 32 percent of all folks about to retire (ages 55 to 64) had sufficient assets to maintain their standard living with income equal to 85 percent of former levels. The calculation included not only stocks and bonds but also primary residences and still two out of three would be unable to retire at the same living standard. At the other end of the range, Boston College’s Center for Retirement Research estimated in 2012 that two in three (66 percent) of households could retire at age 66 without having to cut back on their way of life. By age 70, almost nine in ten (89 percent) would have sufficient savings for the sunset cruise, that is, if they were able to keep working to age 70.

So what can be done to better provision our money boats? We know we need to save more money but we have not done it. What is the solution?