Many Workers Face a Longer Career or a Tough Retirement

A number of signs since the Great Recession indicate that American workers face a grim retirement.  First, traditional pensions have basically been eliminated in the private sector.  This is simply a continuation of a pattern that was evident long before the Great Recession.  Currently, only about 3 percent of private sector workers in the country are covered by a defined-benefit plan.  Employers’ preference for defined-contribution plans, such as 401(k)s, is understandable because employees bear the risk if their investments do not perform as well as expected.

Over 55 percent of American workers have less than $25,000 in savings and investments, excluding their homes.  The percentage of workers who have saved for retirement has plummeted from 75 percent to 66 percent in just the last four years.  In 2012, approximately 40 percent of workers say they lived paycheck to paycheck; such workers are especially likely to give up on the idea of saving for retirement.

At the same time employees are being squeezed financially, their projected lifespans are increasing.  That increase is accompanied by the need for more retirement funds.  American workers who do not save enough will have to either extend their careers or adjust their expectations of a comfortable retirement.

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