From the U.S. Government Accountability Office, www.gao.gov

Transcript for: Americans’ Retirement Security

Description: Audio interview by GAO staff with Charles Jeszeck,
Director, Education, Workforce, and Income Security

Related GAO Work: GAO-15-419: Retirement Security: Most Households
Approaching Retirement Have Low Savings

Released: June 2015


[ Background Music ]

[ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and
information from the U.S. Government Accountability Office. It's June
2015. As Americans live longer, pension coverage shifts to contribution
plans and uncertainties about Social Security abound, the role of
savings in retirement planning may be more important than ever. A team
led by Charles Jeszeck, a director in GAO's Education Workforce and
Income Security team, recently reviewed the financial resources of
retirees and workers approaching retirement. GAO's Jacques Arsenault sat
down with Charlie to discuss what they found.

[Jacques Arsenault:] Your report leads with a fairly striking finding
about American's retirement savings. Can you talk about what you found
as far as how much workers are saving for retirement?

[Charles Jeszeck:] Sure Jacques, the bottom line is many older Americans
don't have a lot of retirement savings. We found that 52 percent of
households age 55 and older have no retirement savings. And 29 percent
have either no retirement savings, meaning they have no IRA or 401K and
they have no defined benefit plan or traditional pension plan as well.
Meanwhile, of the 48 percent that do have some form of retirement
savings, the median balance is about $109,000. This today would get you
an inflation adjusted annuity of about $405 a month at age 65, so it's
not a huge amount.

[Jacques Arsenault:] So that seems like a potentially dire situation.
What did the studies you looked at say about whether this will be enough
for workers to retire on?

[Charles Jeszeck:] Well, while all the studies agree on the basic data,
there's a lot of disagreement about the implications. Some studies are
more optimistic than others. And basically it revolves around what
amount of income does one need in retirement? What level of replacement
income would one need? Now, it can vary considerably across households.
For example, a family that has children out of the house for them to
form their own households or whether they have paid off their mortgage,
they're in a different situation than say a household where somebody has
a serious medical problem. However, all of the studies find that
regardless of the target that they chose between 1/3 and 2/3 of
households do not meet these replacement income targets.

[Jacques Arsenault:] Let me ask you then, what does the saving situation
mean for policymakers or for future planning?

[Charles Jeszeck:] Well, for policymakers, I think they have to really
think about how they want to address this issue. We know now that
traditional pensions are disappearing. We know that 401K plans, from
what we've seen, that the account balances are low. And to some degree
this is a reflection of the slow wage growth that workers have
experienced for the last several decades. And then, I think, the issue
is that there are still a lot of workers that don't have any access to a
retirement savings plan at all. So the bottom line is, I think, that
policymakers in the Congress are going to have to take a real critical
look at this issue in the future.

[Jacques Arsenault:] And can you talk about how Social Security plays
into the situation?

[Charles Jeszeck:] Well, one of the things we found that Social
Security, as you might imagine, is a key component in retirement
savings. In total, it accounts for about 44 percent of all income
received by people in retirement. And over 40 percent of households
between 65 and 74, 44 percent depend on Social Security for over half of
their income. So, it's clearly an essential component.

[Jacques Arsenault:] So then for workers who are approaching retirement
or starting to think about retirement, what should they be doing now?

[Charles Jeszeck:] Well, I think right now the bottom line is that in
many cases, increasingly people are on their own. I think what that
means is that people should try to save as much as they can. It is
really difficult. There are competing demands, student loans, homes, all
sorts of things, but to try to save as much as you can. And then, of
course, if you can get a job that still offers a traditional pension,
you should grab it and stay there because that would really help you in
terms of having a secure retirement.

[Jacques Arsenault:] So then finally, what would you say is the bottom
line in this report?

[Charles Jeszeck:] Well, the bottom line is that the numbers don't look
all that great. For a lot of people, they may be at risk depending on
how you define adequate retirement. They may be at risk of not having
sufficient income at retirement.

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