“The plans work quite well for the top third of workers, not so much for the middle third and not at all for the lower third,” Munnell said. “The top third always work for companies with 401(k) plans, the middle third go in and out of employment with coverage and end up with much smaller balances, and the bottom third are generally not covered by any plan and are entirely dependent on Social Security.”
Things are likely to get worse as the Baby Boom generation retires. The number of Americans age 65 and over is set to increase to 73 million by 2030, or about 21% of the population, compared with 49 million or 15% in 2016, according to the Census Bureau.
There’s little appetite politically to attack the problem. The idea of a national auto-IRA that workers could take from employer to employer has been bandied about for more than 15 years, but the only real action has been at the state level. Even there, most state plans exclude the large and growing number of workers in the gig economy.
Even if Congress can make piecemeal reform, there’s an even bigger concern: Whether Social Security can survive in its current form. If no changes are made, the trust fund’s reserves are expected to run out by 2035, and Americans will receive only 80% of their expected benefits.
“I think something will be done before we get to that, but I keep worrying we’ll have to get awfully close to the abyss before any action is taken,” Munnell said.
This article was provided by Bloomberg News.