The five forces shaping U.S. retirement

Major events of the past few years — including the pandemic, ongoing market volatility, and rising inflation — have left many Americans feeling stressed about their financial futures. Retirement confidence has plunged to levels not seen since the 2008 Global Financial Crisis,¹ as nearly half of savers report pandemic-era hardships have knocked them off course for retirement.²

This challenging period magnifies the cracks in our retirement system. Half of private-sector workers lack access to a workplace retirement plan,³ and nearly half of all adults aged 55 to 65 have no personal retirement savings.⁴ 

Our report identifies five major trends that are shaping retirement today and points to areas where we can convert challenges into opportunity – so that more Americans can enjoy the secure retirement they deserve after a lifetime of hard work.

1. Americans are living longer – but with constraints

In the 20th century, the average American lifespan grew by about 30 years – an unprecedented increase that changed the equation around how to fund longer retirements.⁵ Importantly, these extra years are not evenly distributed. Life expectancy differs by gender, with women living longer.⁶ And it differs by race⁷ and income levels — with Black Americans and low-income Americans well below the average.⁸

2. The first generation of “DC retirees” is here

We’ve reached a threshold moment for American retirees. The first generation of retirees who never had access to traditional pensions — those born in the 1960s — is now beginning to retire in force.⁹ 

In the past, defined benefit (DB) plans were the standard workplace retirement plan.¹⁰ Over time, however, the number of companies offering DB plans has declined dramatically. Today, defined contribution (DC) plans vastly outnumber their DB counterparts.

3. Making retirement plans work in retirement

In a DC plan, saving and investing assets over the course of one’s career is only half the equation. Yet, it’s where the industry and employers have historically focused most of their energy. This is where we see the greatest opportunity to innovate. Lifetime income solutions could provide greater long-term financial security and make retirement plans work in retirement so fewer Americans need to worry about outliving their savings.

4. Access is powerful – when offered

Americans’ retirement preparedness greatly depends on the tools available to them. And the data is clear that having access to a workplace retirement plan is key: Americans are 15 times more likely to save for retirement if they can do so at work.¹¹ And yet, 57 million Americans still lack access to a workplace-sponsored retirement plan.¹²

5. Gaps in retirement outcomes persist 

We know social factors – such as gender, race, socio-economic status, and family structure – impact retirement outcomes. There are several measures of this, from access and participation rates to savings balances. On average, middle-quintile white American households have seven times the retirement savings of their Black counterparts and five times the savings of Latinx ones.¹³ We see these disparities play out in elderly poverty rates, too.

The bottom line

On their own, each of these five forces suggests preparing for retirement is only going to get more difficult for Americans. But when they’re all put together, it’s clear that ecosystem-wide action is needed.

The good news is that progress is being made to steer the industry toward bigger, better trends.

For an in-depth read on these trends and the progress we’re making as an industry, check out the full article below.