Sound the alarm bells! The U.S. Government Accountability Office said in an “updated” report this week that 48% of U.S. households aged 55 and older had NO RETIREMENT SAVINGS.
That would be scary if it were true, but of course the widely reported simple claim does not tell the whole story.
In fact, the GAO’s definition of “retirement savings” in this instance includes only assets in defined contribution plans such as a 401k or an IRA. The statistic does not count savings held outside of a retirement account, Social Security, or traditional defined benefit pension plans.
When you add pension plans into the equation, 72% of households aged 55 and over have retirement savings—which is actually an increase from 64% in 1989.
In the March 26, 2019 GAO report sent to independent Vermont Senator Bernie Sanders, Ranking Member, U.S. Senate Committee on the Budget (at his request), the GAO stated:
- 48% of households aged 55 and over had no retirement savings (compared to 52% in 2013)
- 29% had no retirement savings and no defined benefit (DB) plan (29% in 2013)
- 20% had a DB plan but no retirement savings (23% in 2013)
- 26% had retirement savings but no DB plan (23% in 2013)
- 26% had retirement savings and a DB plan (25% in 2013)
The GAO cited its 2013 and 2016 Surveys of Consumer Finances in compiling the percentages.
Back in January, you may remember Sanders ran afoul of FactCheck.org when he tweeted, “Today, in America, more than half of older workers have no retirement savings–zero. That is unacceptable. We must create an economy that works for all of us, not just the wealthy few.”
The January tweet, made before the updated report, references a May 2015 GAO report requested by Sanders, but makes no effort to point out that the statistic he references excludes anyone who has a pension plan.
FactCheck.org called out the Sanders tweet for referring only to “older workers” and not “older Americans,” and Sanders tweeted a correction to clarify this a few days later. It also called out the tweet as being misleading, concluding that in fact, “59% of workers nearing retirement have some retirement accounts, and, in all, 73% of them have assets in either defined-contribution plans, such as 401(k)s and IRAs, or in defined-benefit plans, such as pensions.”
As a March 27 column on Forbes.com points out, you might think the GAO at least would go to some effort to clarify that its “48% of Americans aged 55 and over have no retirement savings” includes only those lacking a 401k or IRA and excludes all those with a pension, but, like after the first report, it was all too easy for mainstream media to cherry-pick that “half of households aged 55 and over had no retirement savings” while burying any clarification later in the story.
Bloomberg’s March 26 headline for a widely syndicated article citing the report, for example, was: Half of Older Americans Have Nothing in Retirement Savings.
Yikes! Better sound those alarm bells…
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
