EBRI Issue Brief

Retirement Savings Shortfalls: Evidence From EBRI’s 2019 Retirement Security Projection Model®

Mar 7, 2019 14  pages


Measuring retirement security — or retirement income adequacy — is an extremely important topic. EBRI launched a major project to provide this type of measurement in the late 1990s for several states concerned whether their residents would have sufficient income when they reached retirement age. A national model — the EBRI Retirement Security Projection Model® (RSPM) — was developed in 2003. New versions of the model have been generated periodically to include updates for financial and real estate market performance, employee demographics, and real-world behavior of 401(k) participants (based on a database of 27 million 401(k) participants) and IRA account holders (based on a database of 20 million unique individuals).

  • For 2019, RSPM® finds that 40.6 percent of all U.S. households where the head of the household is between 35 and 64, inclusive, are projected to run short of money in retirement. That is down by 1.7 percentage points vs. 2014.
  • The model finds that the aggregate retirement deficit American households in this age cohort face, taking into account current Social Security retirement benefits, is currently estimated to be $3.83 trillion. The similar figure (adjusted for inflation) from 2014 was $4.44 trillion.
  • When pro rata reductions to Social Security retirement benefits are assumed to begin in 2034, the aggregate retirement deficit increases by 6 percent to $4.06 trillion.
  • When looked at on an individual basis, the average Retirement Savings Shortfall for those ages 60–64 ranges from $12,640 per individual for widowers to $15,782 for widows. It increases to $24,905 for single males and $62,127 for single females.
  • Defined contribution plan eligibility has a significant impact: The average retirement deficit for individuals ages 35–39 with no future years of eligibility in a defined contribution plan is $78,046 per individual. This is more than five times the average retirement deficit for those fortunate enough to have at least 20 years of future eligibility in a defined contribution plan (where the average retirement deficit is $14,638).
  • The results also demonstrate the extreme importance of longevity risk in simulating Retirement Savings Shortfalls. Overall, the average retirement deficit for those in the longest relative longevity quartile is 10.2 times the average retirement deficit for those in the shortest relative longevity quartile.
  • A 23 percent pro rata reduction to Social Security retirement benefits beginning in 2034 would increase average retirement deficits by an average of 17 percent for those currently ages 35–39.
  • Quantifying the retirement readiness of American households in this way provides valuable insight for employers, providers, and policymakers.