Retirement Warning Issued to Millions of Middle-Aged Americans

Americans approaching retirement age are critically underprepared for giving up work, according to a major insurance provider.

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Prudential Investments has said that 55-year-old Americans are entering a "midlife retirement crisis" because many do not have enough funds to see them comfortably through their post-working lives. The survey found the median average retirement savings of 55-year-olds to be $47,950.

Upcoming retirees are falling well short of the recommended goal of having eight times annual income saved by the time a person reaches 55. Sixty-seven percent of 55-year-olds expect they may outlive their current savings, compared to 59 percent of 65-year-olds and 52 percent of 75-year-olds.

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Prudential also found that one-third of 55-year-olds and 43 percent of 65-year-olds have already postponed retirement due to inflation and the increasing cost of living. To bridge the financial gap, 48 percent of 55-year-olds are planning to work part-time during retirement, compared to 25 percent of those aged 65 and 13 percent of 75-year-olds.

This affects not only their future financial plans, but also their current ones. The survey found that 35 percent of 55-year-olds reported they would not find it easy to scrape together $400 within one month to cover an unexpected emergency, compared to 19 percent of 65-year-olds and 15 percent of 75-year-olds.

The problem facing soon-to-be retirees has consequences for other age groups. Millennial and Gen Z adults who have relied financial support from their parents may soon need to pay back the favor. Twenty-four percent of 55-year-olds expect they will need financial help from family members once they stop working, twice the proportion of 65- and 75-year-olds at 12 percent each.

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The survey also found that 21 percent of 55-year-olds anticipate needing housing support, compared to 12 percent of 65-year-olds and 9 percent of 75-year-olds.

Today's 55-year-olds will reach the average retirement age of 65 at a time when the Social Security Administration (SSA) is projected to run out of funds. Without action from lawmakers, this could see benefits slashed by as much as 17 percent. The survey found that 83 percent of 55-year-olds say they are less likely to rely on Social Security retirement benefits, compared to 74 percent of those aged 65.

"Attention today is rightly centered on the approximately 11,000 65-year-olds entering retirement every day, but we must also focus as an industry on the opportunity to help a slightly younger generation of workers entering the critical 10-year countdown to retirement," said Caroline Feeney, executive vice president and head of Prudential's U.S. Businesses.

"Further, the financial futures of certain cohorts—such as women—are especially precarious," Feeney added. "The upside is that, with the right planning and strategy to protect their life's work, we can ensure this generation is well-prepared to live not only longer, but better."

Correction 6/27/2024 4:10 a.m. ET: This article was updated to correct a quote provided by Prudential to state 11,000 65-year-olds enter retirement every day, not every week.