The Center for Retirement Research at Boston College looked at the retirement preparedness of households in various socioeconomic groups and found that those in the lowest quartile are more likely to be unprepared for retirement at any given age.
At age 60, 95% of those in the lowest quartile are unprepared, compared to 86% of those in the highest quartile. At age 62, 79% of those in the lowest quartile are unprepared, compared to 64% of those in the highest quartile. At age 65, the comparisons are 61% versus 46%, and at age 70, they are nearly even, at 22%, versus 21%.
However, all socioeconomic groups in each of the four quartiles have a retirement gap. For those in the lowest quartile, 54% have a retirement gap. Forty-eight percent of those in the second quartile have a retirement gap. Forty-three percent of those in the third quartile have a retirement gap, and 36% of those in the highest quartile have a retirement gap.
The center says that “health, marital and wealth shocks all increase the size of the gap. In contrast, an employment shock—that is becoming unemployed—reduces the gap. Three explanations are possible. One is that periods of unemployment decrease a household’s pre-retirement income, which reduces its target retirement rate. The second is that households find a better fitting job, making it easier for them to work longer. The final is that those forced to find a new job in their fifties recognize that they will have to work longer to make ends meet in retirement, so they adjust their plans.”
The problem, the center says, is that while working longer can help improve people’s retirement security, those in the lowest socioeconomic status have “seen little improvement in health and life expectancy and face poor job prospects.”