Increasing life-expectancy and low interest rates are combining to create a retirement crunch that could reach crisis levels, a new report finds.
A survey by the Employee Benefit Research Institute (EBRI) found that 57% of U.S. workers have less than $25,000 in savings and investments excluding their homes, an increase of 8% since 2008.
Over one in four Americans (28%) said they had no confidence they will be able to retire comfortably, the highest level ever recorded over the study’s 23-year history. Nearly half said they could not come up with an extra $2,000 within the next month were an unexpected emergency to arise.
The Great Recession has certainly taken a toll on retirement savings. The EBRI says in 2009, the percentage of workers saving for retirement dropped from 75% to 66%. Adding to the retirement savings crisis is the fact that rising life expectancies could tack on another $97 billion in corporate pension liabilities, according to a Society of Actuaries report.
But the Wall Street Journal says longer life expectancies are nothing compared to the costs inflicted by near-zero interest rates. “The effect of longer life spans on pension obligations has been dwarfed by the impact of declining interest rates over recent years. Because of the way pension obligations are calculated, lower interest rates means that future obligations are higher today.”