Nine Charts about the Future of Retirement
Social Security cuts, shrinking employer-sponsored pensions, low savings rates, and longer life spans have raised fears of a looming retirement crisis. But other trends point to better retirement outcomes, such as women’s increased employment and earnings, longer working lives, and economic growth that raises wages.
How will these conflicting trends play out? How will the next generations of older Americans fare in retirement relative to those who came before? And what will happen to retirees if Congress cuts Social Security benefits to address the program’s long-term financing gap?
These nine charts, based on projections from the Urban Institute’s Dynamic Simulation of Income Model 4 (DYNASIM4), provide some answers. Using the best and most recent data available, DYNASIM4 helps sort out how the profound social, economic, and demographic shifts that are transforming retirement will shape older adults’ future financial security.
Promising policies to promote retirement security
These projections can help policymakers identify and tackle the challenges ahead. Reforming Social Security and other policies could help ensure retirement security for all generations.
- Many retirees will continue to rely on Social Security for the bulk of their incomes. This data tool explores several policy scenarios that could help close Social Security’s long-term financing gap before trust funds are depleted within the next 15 years. Users can examine the distributional impact of pension and Social Security reforms on future retirement income.
- A significant share of baby boomers, Gen Xers, and Xennials will reach old age with little retirement income. Policy remedies such as modernizing the Supplemental Security Income program and boosting minimum Social Security benefits could help the most vulnerable retirees for little cost.
- Working longer improves retirees’ long-term security while boosting worker productivity, generating additional payroll and income tax, and reducing Social Security’s deficit. Policymakers and employers need to recognize the importance of jobs for older adults, promote retraining and flexible work schedules that can accommodate their needs, and eliminate work disincentives at older ages.
- Converting our current regressive and inefficient tax breaks for retirement savings into more targeted incentives could help boost savings for low-income groups. Replacing tax deductions, which disproportionately benefit high-income families, with tax credits would reach those most in need and help reduce the retirement preparedness gap.
- Expanding options to annuitize retirement accounts and savings at retirement could raise retirement incomes and provide more older adults with the security of a guaranteed income stream until death, a growing concern as employer pensions fade away.