More than 40 percent of Americans are at risk of having too little retirement income, a new study by the Employee Benefit Research Institute says.
What's more, the oldest workers are the least prepared to quit working. The EBRI says that 47% of early Baby Boomers are at risk of running out of money in retirement, compared with 44.5 percent of Generation Xers.
For some people, retirement savings won't last very long at all. Among the lowest-income quarter of the working population, 41 percent will be short of money after a mere 10 years in retirement.
The study doesn't say what should be done about this problem; it only suggests that officials take these results into account when designing retirement policy.
Charts in the EBRI study show the benefit of adding one popular fix, an auto-enrollment feature, to 401k plans. A 25-year-old in a plan with auto-enrollment and auto-escalation (where your contributions will increase each year unless you opt out) would accumulate more than twice as much savings as a typical 25-year-old in a plan without those features.
Other recent research, though, says that may not be true. Economists from the IMF and the Urban Institute says that employers with auto-enrollment plans tend to be less generous with their matching contributions. Mauricio Soto and Barbara Butrica write:
... we find that match rates are about 7 percentage points lower among firms with automatic enrollment than among those without automatic enrollment, even controlling for firm characteristics. So while autoenrollment increases the number of workers participating in private pensions, our findings suggest it might also reduce the level of pension contributions.
Clearly, workers need to save more. Just as clearly, there's no easy way to get them to do so.
(A hat-tip goes to Howard Gleckman of the Tax Policy Center for highlighting the auto-enrollment paper.)