The EBRI Retirement Security Projection Model (RSPM) found that for 2019, 40.6% of all U.S. households where the head of the household is between 35 and 54 are projected to run short of money in retirement, down slightly from 42.3% in 2014.
In line with this, the aggregate retirement deficit of American households in this age cohort, including Social Security benefits, is estimated to be $3.83 trillion, down 15.9% from $4.44 trillion in 2014. However, when pro rata reductions in Social Security retirement benefits are assumed to begin in 2034, the aggregate retirement deficit increases by 6% to $4.06 trillion.
On an individual basis, the average retirement savings shortfall for those between the ages of 60 and 64 ranges from $12,640 per individual for widowers and $15,782 for widows. For single males, it is $24,905 and for single females, $62,127.
Defined contribution (DC) plan eligibility has a significant impact. Individuals between the ages of 35 and 39 who have no future years of eligibility in a DC plan have an average retirement deficit of $78,046 per individual. This is more than five-times the $14,638 individual retirement deficit of those who have at least 20 years of future eligibility in a DC plan.
A 23% pro rata reduction in Social Security benefits beginning in 2034 would increase average retirement deficits by 17% for those currently between the ages of 35 and 39.
The results also find longevity risk can play a significant role in increasing retirement savings shortfalls. Those in the longest relative longevity quartile have a retirement deficit that is 10.2-times that for those in the shortest relative longevity quartile.
EBRI’s Retirement Readiness Rating (RRR), on the other hand, measures the percentage of households projected to not run out of money in retirement. In 2019, this rose to 59.4%, up 1.7 percentage points from 57.7% in 2014.