By: Esther Peterson ASA, EA, MAAA
The dream of a gold watch and a big retirement party is fading fast for many Americans. Our current methods of saving for retirement may no longer be enough.
The Retirement Savings Disparity
In early 2026, the National Institute on Retirement Security published Retirement in America: An Analysis of Retirement Preparedness Among Working-Age Americans, painting a sobering picture of how Americans are (or aren’t) preparing for retirement. While total retirement assets hit a record $48.1 trillion in late 2025, that wealth is far from evenly distributed.
At first glance, the numbers might seem encouraging. The average 401(k) balance reached $146,400 by the end of 2025.
Unfortunately, averages can be misleading. A few high earners significantly skew that number upward. The median figures tell a more accurate story about saving for retirement in the U.S.:
- Across all workers the median retirement savings is less than $1,000.
- For workers between ages 55–64 the median savings is only $185,000. This is far below the $1.26 million target experts now suggest for a comfortable retirement in 2026.
It’s no surprise, then, that only 58% of pre-retirees feel confident that their savings will last.
Interestingly, Gen Z is currently the most prepared generation, with 47% on a positive trajectory. Much of this success is tied to newer plan features like automatic contributions and “set-it-and-forget-it” target-date funds that make saving for retirement more consistent and accessible.
Why Saving for Retirement Feels So Difficult
Low retirement savings account balances are not just due to lack of discipline. For many Americans, preparing for their financial futures has become a secondary priority due to increased financial pressures.
Rising Costs
As the cost of living increases, 81% of workers say they are worried that inflation will keep them from saving as much as they’d like in their retirement accounts. When everyday expenses climb, saving for retirement often takes a back seat.
Debt Burdens
In addition, 65% of workers cite debt as a barrier to retirement savings. Although workers with student loan debt are more likely to have access to a workplace retirement plan, they are also more likely to have lower account balances than those without student loan debt. These debts combined with mortgage payments make it difficult for employees to save.
Medicare and Social Security Policy Uncertainty
Concerns about potential changes to Social Security retirement benefits and Medicare have left 60% of American workers and 80% of retirees feeling concerned. A reduction in social security benefits could mean retirement savings need to stretch further than they’d originally planned for.
How the Earnings Gap Impacts Retirement Accounts
At the same time, not everyone has the same opportunity to build retirement savings.
Higher earners are more likely to have surplus income after covering essential expenses. A higher monthly income allows them to consistently focus on saving for retirement and benefit from compound interest growth.
Meanwhile, lower- and middle-income workers face vastly different financial circumstances. Stagnant wages, rising housing and healthcare costs, and greater job instability often make their investment objectives feel out of reach. When day-to-day survival becomes the priority, a retirement savings plan can start to feel like something to worry about “later.”
Retirement contributions become inconsistent, or stop altogether. Even those who understand the importance of retirement saving feel forced to choose between right-now necessities and their retirement goals.
The Importance of Access to Retirement Benefits
Where you work often matters just as much as how much you earn when it comes to saving for retirement.
Workers in professional, unionized, large-company, or public-sector roles are far more likely to have access to employer-sponsored retirement plans like 401(k)s, pensions, and employer matching contributions.
On the other hand, many service-sector, part-time, gig, and small-business workers lack access to any workplace retirement plan at all. This can create another retirement savings gap: workers with employer-sponsored plans are twice as likely to be on track with saving for retirement compared to those without access.
How to Close the Gap and Increase Retirement Income
If you feel behind on retirement savings, you’re not alone. No matter what stage of life you are in, there are still ways to strengthen your retirement savings strategy.
Work 2 Years Longer
Delaying retirement by even just 24 months can significantly improve your financial outlook and reduce pressure on your savings.
Take Advantage of Catch-Up Contributions
If you’re over 50, catch-up contributions allow you to accelerate saving for retirement with additional tax-advantaged contributions.
Use Employer-Sponsored Retirement Plans
If available, take full advantage of your employer’s plan and any employer match options. Both can meaningfully boost your retirement savings account.
Set a Realistic Budget
Determine your desired retirement lifestyle and calculate how much annual income you’ll need in your nest egg. Be sure to account for living expenses, emergencies, and health care costs.
Meet with a Financial Adviser to Optimize Your Investment Portfolio
An adviser can help you determine the best asset allocation to meet your financial goals by full retirement age.
Key Takeaway: Retirement Saving Isn’t an Individual Effort
Saving for retirement is no longer just about individual effort. It’s shaped by income, access, and opportunity.
Employer-sponsored retirement plans remain one of the most effective tools for improving financial security later in life.
For employees: Take full advantage of any available workplace savings opportunities. Prioritize consistency, even if your contributions start small. Know the signs you are ready to retire so you can secure your financial future..
For employers: Your role as a financial wellness provider matters more than ever. Offering accessible, well-designed retirement plans have a direct impact on your employees’ ability to save. Know how to educate your employees on retirement readiness.If you’d like to help your employees make real progress toward saving for retirement, contact Watkins Ross to design a retirement plan that drives both participation and long-term success. Call (616) 456-9696 or email us to get started.
