The retirement gap between the rich and poor continues to increase, concludes
a new study by Boston College's Center for Retirement Research.
The poorest Americans, who already have less saved for retirement, are saving less, while the highest income bracket continues to increase their retirement savings, according to the 2013 Survey of Consumer Finances.
The typical working household approaching retirement had just $111,000 in 401(k) and IRA accounts, which would yield $500 a month in retirement. Surprisingly, that amount fell from $120,000 in 2010. And those figures are not adjusted for inflation. Prices rose 7 percent from 2010 and 2013, so balances fared much worse in real terms.
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Households with a head of household aged 55 to 64 years old in the top income bracket, earning $138,000 or more a year, had a median of $452,000 in retirement savings, the study finds. Those in the lowest income bracket, with income less than $39,000 a year, had a median of $13,000 saved.
The report blames low participation rates, low contribution levels, high fees and leakages for small retirement savings. To help workers boost their retirement savings, the report recommends automatic enrollments in employer-sponsored savings plans, automatically increasing contributions amounts as employees continue working and setting higher contribution levels.
Unlike defined benefit plans, which provide retirees steady income streams, 401(k) plans general pay out lump sums. Retirees decide how much to withdraw each year.
"They face the risk of either spending too quickly and outliving their resources or spending too conservatively and depriving themselves of necessities," writes Alicia Munnell, a director at the Center for Retirement Research and author of the report.
"These risks could be eliminated through the purchase of annuities, but the individual annuity market in the United States is tiny. Therefore, individuals are on their own, and now one really knows what they will do."
That retirement gap is growing fast. The value of retirement savings of the wealthiest households increased by 24 percent between 2004 and 2013,
CNNMoney reports, citing Federal Reserve data. Meanwhile, savings of the poorest group fell by almost 20 percent.
Plus, more low- and middle-income households lack any retirement savings whatsoever. While almost all (90 percent) of those in the top income group have retirement savings accounts, just 9 percent of the poorest bracket and about half of those in the middle have retirement accounts.
Munnell called the savings levels "depressing," according to CNNMoney.
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