• Households should increase their savings relative to prior generations but they are not doing so. One simple way, according to the Center for American Progress, to measure how capable households will be of maintaining their standards of living in retirement is to look at the ratio of their total wealth to their income. This gives an idea of how much in total assets a family has built up relative to approximately how much they consume in a given year.
Christian Weller, one of the authors of the report, said that after taking many factors into consideration such as pensions, Social Security and home equity, "The rule of thumb for the wealth to income ratio is about 10 to one, meaning a person making $50,000 for the majority of their career would need about $500,000 to maintain their standard of living in retirement."
These ratios did improve for near-retirement households during the 1990s and early 2000s, but collapsed following the Great Recession and have shown no signs of recovering. According to data from the Survey of Consumer Finances, households near-retirement age were worse off in 2013 than they were in 1989.
This represents an even bigger problem for retirees because their needs have grown significantly in recent decades, according to the report. Life expectancy has increased, and the retirement age for full Social Security benefits has risen to age 67.
Health care costs have also risen substantially, and the decline in real interest rates since 1983 means that a given amount of wealth accumulated today produces less retirement income than it would have in previous decades.
For all of these reasons, the Center for American Progress says workers should be approaching retirement with greater wealth relative to their income than previous generations did.
However, the opposite is occurring, which may force people to continue working beyond when they intended and they may need to rely on families, charities and government aid to make ends meet in retirement.