EBRI Estimates $4T in Retirement Savings Shortfall

The savings deficits that households are simulated to generate in retirement will be greater if Social Security becomes insolvent.

New research from the Employee Benefit Research Institute (EBRI) indicates the retirement savings gap for Americans varies widely by gender and marital status, among other factors.

The aggregate national retirement savings deficit is about $4.13 trillion for all U.S. households between ages 25 and 64, according to EBRI’s new analysis based on results from its proprietary Retirement Savings Projection Model (RSPM). The Retirement Savings Shortfalls (RSS) show that for those on the verge of retirement (Early Baby Boomers), the deficits vary from $19,304 (per individual) for married households, increasing to $33,778 for single males and $62,734 for single females.

EBRI says while these RSS values may appear to be relatively small considering they represent the sum of present values that may include decades of deficits, it is important to remember that fewer than half of the simulated lifepaths modeled are considered to be “at risk.” Looking only at those situations where shortfalls are projected shows that the values for Early Boomers vary from $71,299 (per individual) for married households, increasing to $93,576 for single males and $104,821 for single females.

RSS values are much smaller for Gen Xers with significant years of future eligibility for defined contribution plan participation. The deficit values for Gen Xers assumed to have no future years of eligibility is $78,297 per individual. That shortfall decreases substantially, to $52,113, for those with one to nine years of future eligibility, and even further to $32,937 for those with 10 to 19 years of future eligibility.

Gen Xers fortunate enough to have at least 20 years of future eligibility in those programs could find their average shortfall at retirement reduced to only $16,782.

EBRI notes that its estimate of a $4.13 trillion retirement savings deficit for American households is based on current Social Security benefits not being cut in the future. With the program’s Old-Age, Survivors and Disability Insurance (OASDI) trust fund projected to be exhausted by 2033, EBRI estimates the retirement deficit will increase to $4.38 trillion at that time if no additional funding is provided and a pro rata reduction in Social Security benefits is allowed to take effect.

To illustrate just how important Social Security to Americans’ ability to afford retirement, EBRI also estimates that if the program were to be eliminated this year, the aggregate national retirement deficit would increase by nearly 90%, to $7.87 trillion.

The full report, “Retirement Savings Shortfalls: Evidence from EBRI’s Retirement Security Projection Model,” is published in the February EBRI Issue Brief, online at www.ebri.org