Strength of America’s Retirement System

ICI’s examination of data and academic research finds that the US retirement system has successfully provided adequate retirement resources to the majority of Americans, and continues to do so. Research shows that most households are able to maintain their standard of living when they retire, and that successive generations of retirees are better off than previous generations—on average, more-recent retirees have higher levels of resources to draw on in retirement than previous generations.

The Retirement Pyramid

Retirement resources are best thought of as a pyramid with five basic components: Social Security, homeownership, employer-sponsored retirement plans (defined benefit and defined contribution, from both private-sector and government employers), individual retirement accounts (IRAs), and other personal savings. The pyramid is a better way to think about retirement resources than the old “three-legged stool” analogy (Social Security, pensions, and personal savings), because households don’t need to rely on each part of the retirement pyramid equally to maintain their standard of living in retirement.

The composition of the retirement resource pyramid—that is, the extent to which retirees rely on any given resource—differs from household to household. For example, while Social Security covers households across all levels of earnings, it replaces the largest portion of average lifetime earnings for those with low lifetime earnings.

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Video

The Retirement Pyramid: How to Best View Your Resources

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Research

Summary: Our Strong Retirement System: An American Success Story (pdf)

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Research

Our Strong Retirement System: An American Success Story (pdf)

Adequacy of Retirement Resources

Today’s 40-year-olds are the first group of workers who will spend their full career in a 401(k)-based system. Studies conducted by ICI and the Employee Benefit Research Institute (EBRI), as well as by academic economists, show that these workers can replace a substantial portion of their working income in retirement from their accumulated 401(k) assets.

For example, in “The Changing Landscape of Pensions in the United States,” James Poterba of the Massachusetts Institute of Technology, Steven Venti of Dartmouth College, and David Wise of Harvard University conclude that “the advent of personal account saving will increase wealth at retirement for future retirees across the lifetime earnings spectrum.”

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Perspective

401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2018 (pdf)

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Perspective

What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances...

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News Release

New Analysis Shows Prior Estimate Vastly Overstates Retirement Plan “Leakage”

New Analysis Shows Prior Estimate Vastly Overstates Retirement Plan “Leakage” Washington, DC; June 8...

Retirement Income Since ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) established sweeping changes in the regulation of pension plans. Since then, private-sector employees have become more likely to work for an employer offering a defined contribution (DC) plan, such as a 401(k), than one offering a defined benefit (DB) plan.

Retirees in 2012 were more likely to receive income from private-sector employer-sponsored retirement plans, either directly or through a spouse, and more likely to enjoy a higher median retirement income, than their counterparts in the mid-1970s.

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ICI Viewpoints

In Reality, Data Tell a Different Story of Old Age in America

“The New Reality of Old Age in America” (September 30) portrays economic security in retirement by...
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Video

Focus on Funds: New Data Offer Good News on American Private Pension Income

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News Release

Private-Sector Retirement Plan Income Has Become More Prevalent, Not Less

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