We’re all aware of the economic disparity in America — the wealthiest have the highest percentage of money, and the poorest have the least. A side effect of this is making itself known in the growing gap between the amount that the rich and the poor are able to save for retirement.
As it is, one in four Americans believe that they will have to work until the age of 80 to be able to retire comfortably.
According to CNN, a new study reveals that the households in the lowest income bracket, which is less than $39,000 per year, have an average of just $13,000 in savings. Conversely, the highest income bracket, which is above $138,000, have an average of $452,000 in savings.
The report, which is from Boston College’s Center for Retirement Research, analyzed data from the Federal Reserve.
The gap that exists is clear — and expected — but it’s also growing. In about the last 10 years, the retirement savings held by the wealthiest grew 24%, while that which is held by the poorest saw a decrease of 20%.
Not only are the retirement savings for America’s poorest decreasing, but more and more households don’t have any savings for retirement.
By the numbers, 90% of America’s richest have retirement savings, compared with less than 10% of America’s poorest.
The author of the report, Alicia Munnell, says that one way to help close the gap and help more people start saving for retirement is to increase the rate by which employers enroll their employees in retirement plans; another is by requiring them to automatically enroll them in it.
This is a particularly apt suggestion, since in the last 10 years or so, the number of employers that offer retirement fund options for their employees dropped 20%.
If peoples’ employers don’t offer retirement options, there are still other avenues for them to use to start saving for retirement like investing.
“The single most important action young people can take is to start saving money,” said Beth Kurth, President, Corporate Forum, a Boston-area resource for investors. “Saving and investing takes practice and once that pattern is established, there is a virtuous cycle as you see the savings grow.”
There are many investment opportunities that can be undertaken outside of an employer-sponsored plan, from savings bonds to joining an investment club to mutual fund purchases.