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Surveys find that barely 1 in 5 Americans are confident of their ability to support a comfortable retirement – and unfortunately for good reason.

In 2014, according to the Federal Reserve, 31 percent of working Americans reported having “no retirement savings or pension whatsoever.”

Many Americans think of savings as a matter of willpower and personal behavior – much like dieting and exercise. It’s one reason why the worsening state of Americans’ retirement security – now approaching crisis proportions – has yet to emerge as an issue that demands extensive government intervention.

In truth, the nation’s retirement savings crisis is as much a problem of public policy as it is about how Americans manage money. Families face massive structural barriers that no amount of personal financial discipline can overcome. Among the reasons retirement is increasingly unaffordable:

1. One in three Americans lacks access to an employer-sponsored retirement savings plan.

Research finds that people are more likely to save for retirement if they’re enrolled in an employer-sponsored retirement plan (and especially if enrollment is by default). Yet in March 2015, just 49 percent of Americans working in private-sector jobs were participating in an employer-provided retirement plan such as a 401(k), according to the Bureau of Labor Statistics (BLS).

One major problem is lack of access. The workers most likely to be offered an employer-sponsored plan work for large firms (those employing 500 people or more). But the majority of Americans work in smaller companies, including more than a third who work in firms with 100 or fewer employees. Because of administrative burdens and other costs, far fewer of these smaller firms offer retirement benefits to their workers.

Many more Americans are also working for themselves, which reduces the likelihood of having a retirement savings plan even further. A survey by the Freelancers Union finds that as many as 53 million Americans – 34 percent of the workforce – are freelancing. Moreover, a 2013 survey by TD Ameritrade found that among the growing ranks of these self-employed Americans, just 8 percent were regularly setting aside money for retirement, and 28 percent weren’t saving for retirement at all.

2. Financial emergencies are forcing many families to raid or postpone retirement savings.

For many Americans, their efforts to save are undermined by unexpected financial crises: a broken appliance, an unexpected car or home repair, a medical emergency. These emergencies are also more common than you might think.

A recent analysis of consumer incomes and spending by the JP Morgan Chase Institute found that financial “volatility” is the norm, not the exception, for the vast majority of American households, including among the wealthy. According to the study, 60 percent of U.S. households see fluctuations in spending from month to month that are greater than 30 percent.

The study also estimated that “the typical middle-income household” needs $4,800 in liquid assets (i.e., cash) as a buffer against these financial ups and downs. However, the study also found that the typical middle-income household falls short of this amount by $1,800.

For many households, a 401(k) ends up serving as a de facto emergency savings account. According to Fidelity Investments, more than 1 in 5 Americans – or 21.9 percent – have an outstanding loan against their 401(k). As of June 2015, the average balance on these loans was $9,720. The Pension Research Council also finds that 40 percent of Americans with 401(k) accounts have taken loans within the past five years.

3. Families are paying more for college instead of saving for retirement.

Rising college costs are also taking a toll on Americans’ retirement prospects. First, parents are spending more to send their children to college, and they’re doing so at the expense of their retirement savings.

A recent survey by T. Rowe Price found that 57 percent of parents say that saving for college is a higher priority than saving for retirement, and that 49 percent would delay their own retirement to pay for their children’s college. Moreover, 15 percent said they intend to tap retirement accounts to pay for college.

According to Sallie Mae, spending on college costs rose to $24,164 in 2015, up 16 percent from the year before, while contributions from family income and savings rose to $10,365, surpassing scholarships and grants as sources of funding for college.

The growing burden of student debt – including for those in middle age – is also squeezing out people’s ability to save.

As of the end of the second quarter of 2015, student debt was the largest source of household debt after home mortgages, with $1.19 trillion outstanding (compared to $703 billion for credit cards).

The Federal Reserve Bank of New York finds that the number of student borrowers rose by 89 percent, while average balances grew by 77 percent between 2004 and 20014, to about $26,000. According to the Federal Reserve, 23 percent of adults reported having student debt of some kind in 2014, both on their own behalf and on behalf of their kids. In fact, borrowers over age 40 now account for more than one third of student loan balances.

4. People have less money to save.

A final reason that Americans aren’t putting away enough money for retirement is that they simply don’t have enough income. As the following chart from the U.S. Census Bureau shows, real median incomes haven’t yet caught up to pre-recession levels. In 2014, median household income was 6.5 percent lower than in 2007, just before the recession.

Source: U.S. Census Bureau


Some progressives – most notably presidential candidate Bernie Sanders – have proposed expanding Social Security as a way to address the retirement savings problem. Sanders’ plan, for example, would lift the cap on taxable earnings for Social Security and increase the average benefit by $65 a month.

But given the severity of the underlying problems that make it so difficult for Americans to save, expanding Social Security isn’t a sufficient long-term fix. Rather, what Americans also need are universal access to retirement savings plans; more relief from spiraling college costs and student debt; and policies that will raise middle-class incomes through well-paid jobs.

In other words, the right debate over Americans’ retirement security is indistinguishable from how to preserve the American middle class.

Anne Kim

Anne Kim is a Washington Monthly contributing editor and the author of Abandoned: America’s Lost Youth and the Crisis of Disconnection. Follow Anne on Twitter @Anne_S_Kim.