There have been many articles published about how people are not saving enough for retirement. Unlike their parents, most workers today cannot count on a pension. That means future retirees need to be more diligent about socking money away into 401(k)s and other investment accounts.
The number of workers covered by a pension plan peaked in 1980 at about 30 million. At that time, only about 20 million workers participated in 401(k) plans. Today, the number of people contributing to 401(k)s is nearly 80 million, and only about 15 million workers are covered by pensions.
But those who have already retired and are collecting their pensions are doing pretty well. In fact, a new retirement study shows they’re living better than previously thought. The study found that the median household income for those age 65 and older in 2012 was actually 30 percent higher than was reported in that year’s census.
Why the discrepancy? Many census respondents thought of pensions and IRA distributions as savings, and didn’t report those benefits as income. That made them appear much poorer than they really were. The new study also reveals that retirees are less heavily dependent on Social Security than previously thought.
A fear of outliving savings is a common concern for many retirees, whether they have a pension or not. It was once believed that the poverty rate of people age 85 and older was 50 percent higher than people in their late 60s and early 70s. However, the new study shows the rise in poverty rates is more gradual with age.
These figures are likely to change for the next generation of retirees, most of whom will leave the workplace without a pension. But with sound financial planning, both during the working years and afterwards, retirees without a pension can still stay on track well into their golden years.