Many are self-employed or work in smaller companies, which in many cases do not have the organisational heft to set up a 401(k) plan. Big companies in low-wage industries are also less likely to offer a retirement plan. And on modest wages, it becomes harder to set aside money for an IRA.
“We have a crisis unfolding here,” says Russ Kamp, a pensions consultant. “We’re asking people to set aside precious resources they don’t have . . . For millions and millions of Americans, the only thing they’ll have is Social Security.”
Social Security is a federal system originally set up by Franklin Delano Roosevelt in 1935 and financed through payroll taxes. Together with the Supplement Security Income programme, it accounts for over 90 per cent of the income for the bottom quarter of retirees, according to the NIRS.
But Social Security only provides about 35 per cent of a typical household’s pre-retirement income. This is inadequate for most retirees, and especially so for those without some other savings to fall back on. “Because Social Security is so limited, we are far more dependent on 401(k) plans,” Mr Hunt points out. “In an era where people change jobs often and do more gig type jobs, this is a huge challenge.”