The financial security of the next generation of New York retirees is at risk. If current trends persist, 37% or close to 750,000 workers approaching retirement who live in metropolitan areas of New York State, are projected to be poor or near poor in retirement.
This impeding crisis, documented in a recent report by SCEPA and New York City Comptroller John C. Liu, is due to the decline in employer sponsorship of retirement savings vehicles, the increasing prevalence of defined contribution (DC) plans over traditional defined benefit (DB) plans, and the overall erosion of household savings.
To assess the future impact of these factors on the retirement readiness of New Yorkers, SCEPA published "New York's Retirees: Falling Into Poverty," a research report on the downward mobility of New York's next generation of retirees. We looked at workers who are currently ages 25-64 and are living in metropolitan areas of New York State (46% of whom live in New York City), and we projected the income stream that will be available to them when they reach age 65. Results show that if current trends persist, many middle and low income workers will experience downward mobility or a steep drop in their living standards when they retire, and several will face severe economic hardship:
- 23 percent of workers ages 25-64 living in New York State metropolitan areas will not have the assets needed to prevent them from being poor when they retire at age 65. This means their total net worth, including all of their savings for retirement in employer-sponsored plans and Social Security built up over their lifetime, will not be sufficient to keep them above the NYC adjusted poverty level of $13,662.
- 36 percent of workers ages 55-64 living in New York State metropolitan areas who are nearing retirement are at risk of being poor or near-poor, meaning they will be living at or below 200 percent of the NYC adjusted poverty level of $27,324.
- 74 percent of currently low-income workers and 35 percent of currently middle-income workers ages 50-64 living in New York State metropolitan areas are projected to be poor or near-poor in retirement.
- Although workers who participate in a retirement plan are at a lower risk of being poor in retirement than those who do not save for retirement, workers whose primary retirement plan is a DC plan fare significantly worse than those whose primary plan is a DB plan. Thirty-eight percent of workers ages 25-64 whose primary plan is a DC plan will be poor or near-poor compared to only 7 percent of DB plan participants.