Two Numbers: The Coming U.S. Retirement Crisis

The prospect of public sector pension cuts has raised plenty of anxiety lately about retirement. We all know Americans probably aren't as saving as much as they should, but how bad could it be?

A lot worse than you might imagine. Thirty million Americans between the ages of 50 and 64, one half of the population nearing retirement, have no retirement savings at all, according to an analysis by the Schwartz Center for Economic Policy Analysis at the New School. That means no pension plan, no 401(k), no IRA.

For those nearing retirement with savings, the prospects aren't that much better. Fifteen million or so Americans – and these are the most prepared for retirement in their age group of 50- to 64-year-olds – have average retirement savings of $140,654. Typically financial planners advise 10 times your income at retirement to maintain your living standard. That would imply an annual income ahead of retirement of around $14,000, but in fact, the annual income of Americans approaching retirement in this category is more than $50,000. That suggests many with retirement savings will still experience a sharp drop in living standards upon once they stop working.

What has really hurt Americans nearing retirement is the Great Recession and its aftermath. As some lost jobs, they also lost retirement contributions and turned to their retirement accounts to make ends meet. While the labor market has been slowly improving, many of those who do land new jobs are not finding employment with the same benefits they once had. "If you lose a couple years in accumulating retirement savings, say five years before you retire, you can never catch up," said Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis. The retirement savings crisis may turn out to be a lot closer than we think.