Most households maintain their standard of living when they retire and, on average, more recent retirees have higher levels of resources to draw on in retirement than previous generations, according to “The Success of the U.S. Retirement System,” the Investment Company Institute (ICI) paper. The U.S. retirement system has become better at providing resources, ICI found.
Adjusted for inflation and the number of households, assets earmarked for retirement were nearly three times larger in mid-2012 than in 1985. Furthermore, poverty among people ages 65 or older has fallen from nearly 30% in the mid-1960s to 9% in 2011, the report notes.
“The future presents us with many challenges, such as an underfunded Social Security system and rising health care costs,” said Paul Schott Stevens, ICI president and chief executive. “As policymakers respond to these challenges, it is critical that they have research like this that analyzes the entire system. ICI believes we must preserve the best attributes of the system, including tax deferral and portability, and build on the system’s success by strengthening Social Security for the long term, expanding coverage, and continuing to allow innovation in plan design.”
The paper also illustrates that households save for a variety of reasons throughout their lives. Households’ focus on savings change as they age, with the emphasis shifting to retirement over time. For instance, in 2010, only 14% of households younger than 35 reported that retirement was a primary savings goal, compared with nearly half of households ages 50 to 64. Also, younger households typically are focused on other goals: 32% of households younger than 35 reported that saving for education, homes, or other large purchases was their primary saving goal.
The paper is available here.