The Inclusive Wealth Building Initiative is out with a study that provides a shocking picture of the US retirement landscape. “The Initiative, a project of The Economic Innovation Group, derived its data from various surveys, including the Census Bureau’s Survey of Income and Program Participation and the Bureau of Labor Statistics’ National Compensation Survey. The study also used the 2019 Current Population Survey’s Annual Social and Economic Supplement”, as the 2020 study may have been impacted by Covid-19 disruptions. The study found that ONLY 46% of workers had access to an employee-sponsored plan and worse, only 38% of those indicated that they are participating. These numbers are in stark contrast to other studies that I’ve seen. If accurate, this magnifies the retirement crisis that I’ve been fearing.

Not surprisingly, lower-waged American workers (those earning <$50,000) are participating to a far lesser extent. In fact, it is estimated that low-wage workers participate at a rate that is 6% lower than the average worker based on earnings, while being 25% lower than the top wage earners. As we’ve indicated before, it takes a certain level of income to be able to just live in the US and regrettably there are millions of American workers that fall below that level. The lack of discretionary income certainly prohibits most of these workers from funding a retirement program.

Some of the largest states by population, such as California and New York, have the lowest percentage of companies offering retirement benefits. In fact, the bottom 10 states in offering employer-sponsored plans to low-wage earners account for 43% of the country’s population, including CA, NY, FL, and TX. Every study that I’ve read highlights the fact that most Americans do not save outside of an employer-sponsored plan. The fact that <50% of Americans have access to a retirement plan is outrageous. The long-term implications are potentially quite severe, as many of these individuals will need support from the federal government’s social safety net. A pay-as-you-go system is far more costly than one that is pre-funded and built up over time through a proper retirement benefit. This reality is why we at Ryan ALM continue to fight to protect and preserve defined benefit (DB) plans for the masses, as DB plans are the best and least risky retirement vehicle.

Asking untrained participants to fund, manage, and then disburse a retirement benefit is poor policy that will lead to tragic outcomes. We are not prepared as a country to meet the challenges that this reality will create. I’m dismayed by the results of this study and you should be, too.