Average American Family Faces a 37% Shortfall in Retirement Income
WASHINGTON, DC, October 19, 2009 -- The average American working household will have only 63 percent of what it will need for a dignified retirement, leaving millions of Americans to face very difficult choices about housing, food, and health care upon retirement, according to new report by McKinsey & Co. This Retirement Readiness Index of 63 means that the average American household will be facing a savings shortfall of nearly $250,000 at the time of retirement.
According to the McKinsey & Co. Retirement Readiness Index (RRI) – which takes into account Social Security, Defined Benefit plans, Defined Contribution plans, and personal savings – households need an RRI of 100 to maintain their current standard of living in retirement. An RRI below 80 would mean sacrificing spending on essential needs.
The McKinsey & Co. report also found that for every five years our nation puts off addressing retirement security, there will be a 10 percent decline in the typical American's standard of living in retirement. If nothing is done, McKinsey & Co. estimates that by 2035, Americans will face a staggering $27 trillion shortfall in retirement savings.
"We are facing an unprecedented crisis in retirement security," said Steve Bartlett, President and CEO of The Financial Services Roundtable. "This report must serve as a wake-up call for all of us – policymakers, the financial services industry and individual Americans – to take immediate action to restore our nation's retirement security."
The McKinsey report also showed that the U.S. could reduce the "retirement gap" by nearly half, and increase retirement assets by $3.5 trillion over the next decade, through a consistent focus in the following areas:
- Improving the accessibility of retirement plans.
- Increasing plan participation and savings rates for all Americans especially lower and middle income households.
- Helping Americans to better manage their in-retirement risks in order to draw a stable "retirement paycheck.
- Enabling Americans to work longer.
For a copy of the report, "Restoring Americans' retirement security: A shared responsibility," or to learn more about National Save for Retirement Week (Oct. 18-24), go to www.MyRetirementSecurity.org.
About the Financial Services Roundtable
The Financial Services Roundtable represents 100 of the largest integrated financial services companies providing banking, insurance, and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO.
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