How Would More Saving Affect the National Retirement Risk Index?

The National Retirement Risk Index (NRRI) shows that half of today’s working families are at risk of not being able to maintain their standard of living once they retire. This result is not surprising since at any given point about half of private sector workers do not have an employer-sponsored retirement plan, and many who do have a plan end up saving relatively little. The question is how would additional saving affect the NRRI? The discussion proceeds as follows. The first section recaps the nuts and bolts of the NRRI. The second section reports the impact on the NRRI of increasing contribution rates for both 401(k) participants and for workers without a workplace retirement plan. The third section discusses why the impact appears to be relatively modest. The fourth section shows that the only way to dramatically reduce the percentage of households at risk is to combine the additional saving with two more years of work. The final section provides two main conclusions. First, increasing saving is a realistic option only for those workers who have access to a retirement plan at work. In the absence of such coverage, millions of households have no easy way to save. Second, realistic increases in saving alone are not likely to solve the retirement crisis, but when combined with working two years longer can significantly reduce the share of households at risk.