An Overview of the US Pension Industry by Numbers

With such a large working population, it stands to reason that the US pension industry is one of the largest in the world. The assets at play here are incredible, and all are geared towards making the lives of Americans more comfortable in their retirement. The team at Procentia helped us take a closer look at some of the numbers involved with the US pension industry.

How Many Americans Have Savings?

Due to the high costs of living and other issues facing them, there are many Americans who do not have any savings, let alone savings that are put aside explicitly for retirement. According to a wellness report from the Federal Reserve in 2018, nearly a quarter of US adults had no retirement savings at all. Of those who said that they had no savings, 42% were aged 18-29 and 26% were aged 30-44 – crucial ages where a lot of work can be done to put money aside for retirement. More worryingly, 13% of those with no retirement savings were aged 60+. In other words, a significant portion of the US population is entering retirement age without the correct funds.

This is not good for the future of much of the American workforce. With many struggling to save for their retirement, there is a real growing issue as to how many Americans are going to survive once they reach retirement age. We might see many Americans choosing not to retire and actually stay working long past when they should feasibly stop.

How are Americans Saving for Their Pensions?

America does have a government pension, but it is not as easily accessed by the general population as we see in other countries such as the UK or those in Europe. It is more typical for Americans to use private savings and workplace pensions to save the majority of what they need for their retirement.

In 2019, the Bureau of Labor Statistics discovered that 56% of private-sector, state, and local government workers participated in some sort of workplace retirement plan.

An Overview of the US Pension Industry by Numbers

What are IRAs and 401(k)s?

If there is not an employer-led pension program, many Americans choose to place their savings in either an IRA or a 401(k). These are some of the most popular options for those who want to save for their retirement.

An IRA is an Individual Retirement Account. There are several different types that savers can opt for, and these come with a number of tax advantages that make them a good choice for those who want to save and invest as they work towards their retirement. They can hold a number of financial products such as stocks and bonds. It is thought that about a third of American households hold an IRA.

A 401(k) plan is offered by companies to their employees. This primarily allows employees to make contributions to their plan for their retirement, and the company can then decide whether or not they want to make a contribution too. There are two types of 401(k) plans, with the main difference between them being how they are taxed. It is thought that only 32% of Americans are saving for their retirement with a 401(k).

How Much Should Americans Be Saving?

So, how much should Americans be saving for their retirement exactly? There are several factors that can determine this, including but not limited to things such as their income and living costs. While automating your savings or looking into other financial routes might be a good idea for some, many have to make do with simply saving based around their salary.

If contributions are automatically deducted from the saver’s salary, this means that they are often able to build up their retirement savings with little issue as they won’t even notice this money missing from their account. It is thought that approximately 10-17% of a salary should be saved from age 25, if the goal is to retire at 65. Even if an individual cannot commit to that amount, choosing to save and invest even 1% of their income will help to put something aside. Everyone hopes to be able to retire someday, but one needs to have the money put aside to be able to do so. This is not the easiest of tasks, and as a result many Americans are currently falling short on the amount that they need to save for a comfortable retirement. The numbers currently show that the US pension industry is in some trouble. Changes need to be made, otherwise we could be left with many workers unable to afford to retire.

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About Dequiana Jackson

Dequiana Jackson, Founder of Inspired Marketing, Inc., helps overachieving women entrepreneurs conquer limiting beliefs and create marketing plans that win. This includes one-on-one marketing plan development, digital product creation, web design and content marketing. Dequiana is the author of Know Your Business: How to Attract Ideal Clients & Sell More and runs the award-winning blog, Entrepreneur-Resources.net.

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