The retirement crisis is deepening, with recent generations of Americans less financially prepared for their golden years than their parents or grandparents, according to a new study.
The study by the Pew Charitable Trusts suggests that people who retire over the next quarter-century could suffer declining standards of living compared with earlier generations, a rare and troubling phenomenon in modern-day history.
The retirement math is most vexing for Generation X, those people born between 1966 to 1975, and for so-called late boomers, who were born after 1956, according to the study by the Pew Charitable Trusts.
Gen-Xers are on track to generate or “replace” only half their pre-retirement income after they stop working, according to the study. Late boomers fare only slightly better at 59%.
By contrast, the replacement rate for people born during World War II is 99%, according to the study. It’s 82% for early boomers born from 1946 to 1955.
The replacement rate compares annual income in retirement -- through sources such as Social Security, pensions and personal savings -- to annual income before retirement.
Retirees are thought to need at least 70% of their pre-retirement income to live comfortably and maintain their standard of living. Thus, a couple who earned $100,000 a year during their working lives would need $70,000 annually in retirement.
The generational chasm is caused in significant part by the high levels of debt carried by late boomers and Gen-Xers.
Low savings and high debt are a particular drag on Gen-Xers, a sign that soaring student-loan debt and sluggish career prospects are weighing on people in their prime earning years.