by YiLi Chien and Paul Morris

As baby boomers age, significant debate has emerged about whether there is a retirement crisis developing in the United States. Some argue that the retirement situation is poor for many Americans, with many approaching retirement age with little or no savings. However, others describe the situation as better than commonly thought, as many retirees report living comfortably.

This article aims to offer a glimpse into the current state of retirement readiness in the United States. We examine the participation in and usage of the two most common types of financial accounts designed exclusively for retirement savings.

The first type is the employer-sponsored pension plan (ESPP); this includes defined-benefit plans, such as traditional pensions, and defined-contribution plans, such as 401(k) plans. The second is a retirement plan offered independent of the workplace, which includes individual retirement accounts (IRAs) and Keogh accounts.

Overall, our analysis indicates that many households either do not utilize or underutilize the retirement savings plans available to them. We also examine how retirement savings vary with age and discuss alternative ways that nonparticipants may be preparing for retirement.

In our analysis, we utilized data on retirement account participation and account balances from the Survey of Consumer Finances (SCF). Every three years, the survey provides cross-sectional data on U.S. households’ demographic characteristics, incomes, balance sheets and pensions. The Federal Reserve Board, along with the Department of the Treasury, released the SCF data for 2016—the most recent year available—in September 2017. The primary unit of analysis in the SCF is the household, and the survey attempts to capture the distribution of households in the U.S. Thus, the results reported in this article should represent the general state of participation in and usage of retirement accounts in the...

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