The report pointed out that while it may be tempting to look at retirement readiness in terms of how much is saved in retirement accounts alone, that approach provides an incomplete picture of how much money is actually available to people once they retire. It explained the three-legged stool model of retirement savings, which accounted only for Social Security, employee pensions and personal savings, was used in the past.
But today, a more accurate view of retirement savings is the five-layer retirement resource pyramid, which takes into account the large portion of retirement savings held outside retirement accounts. At the base of the pyramid, Social Security and homeownership make up the largest retirement resources for many retirees; followed by employer-sponsored retirement plans; IRAs; and other assets at the top. This pyramid, the report said, reflects the modernization of the retirement system as a whole rather than focusing on employer-sponsored plans and Social Security only.
The research said both savers and retirees are better off than those in earlier decades and are pleased with their situations. The future retirees will be able to maintain the standard of living set by previous generations, it said, noting that retirees born during the Great Depression had a median income equal to 109% of their average inflation-adjusted earnings. Gen Xers are on track to replace 110% of their earnings.
And while the reputational issues with the retirement system may be over-played, work remains to be done to improve the prospects for more Americans, the research said. It recommended increasing plan access, improving plan features and advocating for public policy such as Social Security reform.