Chapter Three

Working for
the Nest Egg

Americans are about $6.6 trillion short of what we will need to maintain our current standard of living in retirement.

If you look at the lowest income quartile of earners, 41% of them will run short of money within 10 years of retirement. I don’t have a clue what will happen to them after that.

— Jack VanDerhei Employee Benefit Research Institute

53% of American workers 30 and older are
on a path that will leave them financially unprepared for retirement.

In 1989, just 30% faced the same risk.


Death of the Pension


85% of private sector
employees had pensions


35% of private sector
employees have pensions


In employer-maintained “defined-benefit” pensions you receive a fixed regular payout based on salary and how long you worked at the company.

Company pensions have largely been replaced by retirement savings accounts like 401(k)s funded by employee (and often matching employer) contributions.

How confident are you that you’ll have enough money to live comfortably through retirement?

How does your confidence measure up?

The Employee Benefit Research Institute has polled Americans since 1995 about their thoughts about and confidence in retirement. See how their answers have changed in eighteen years.


your answer: very
your answer: somewhat
your answer: not too
your answer: not at all


your answer: very
your answer: somewhat
your answer: not too
your answer: not at all

How much do you need for retirement?

75% of folks nearing retirement in 2010 had less than $30,000 saved.

How much income do you think you’ll need per month?

Remember: The rule of thumb is that you’ll need 80% of your current income (at a minimum). So if you’re making $1,250 per month, you’d want to have at least $1,000 to maintain your current standard of living.

(Choose a level of income you’ll need.)

You should put away per month.*

* Please don’t base your entire financial well-being on an interactive bubble. Note that this calculator is a very simple, rough, ballpark estimate and is meant to only provide you a sense of how much you should be saving. It should not be used as a replacement for expert financial advice. (Information from Sheryl Garrett, CFP, AIF. Adapted and used with permission from her book Personal Finance Workbook For Dummies.) The numbers above are based on a single person and do not take into account Social Security, pensions, etc. They also assume starting with $0 savings, retiring at 65, getting a 7% return on your savings, and leaving nothing for heirs or charity. All figures in 2012 dollars.

The 7% return on savings we mention above presumes a portfolio mix of 60% stocks and 40% bonds, using actual historical returns for this mix of assets. But as Sheryl Garrett (CFP®, AIF®, founder of The Garrett Planning Network, Inc.), who provided the data, points out, timing can make all the difference. Volatility can change the average annual return dramatically. According to the Social Security Administration, for most of us, Social Security alone will not provide enough income for a comfortable living, even assuming the program experiences no benefit cuts in coming years.

So many people are clueless when it comes to investing.

— Sheryl Garrett CFP®, AIF® Founder of The Garrett Planning Network, Inc.

Investment firm BlackRock has found that the average investor underperforms even inflation. S/he knows she is supposed to buy low and sell high. But check out this rather sobering chart, which shows that in fact individual investors, on average, buy high—joining the crowd when stocks or bonds are rising in value—and sell low—stampeding to get out of investments once they have lost value.

The average investor underperforms inflation

20-year Annualized Returns by Type of Investment (from 1992–2011)


I retired.
Then the crash hit.

Babs Tatalias retired at 61. After being forced back to work by the stock market crash in 2008, she found a new passion and a new career.

A third of the baby boomers have no retirement savings.

— Diane Oakley Executive Director of the National Institute on Retirement Security

I can’t afford to stop working yet.

Rather than retire after a long career in the federal government, 63-year-old Charles Smith works in a produce department for $10 an hour to support his family

The financial crash of 2008 swept away about 40% of Americans’ wealth, forcing many workers to stay on the job to try to recoup some of their savings losses. Some permanently left the stock market. Others were relying on the equity tied to their home values, which are still far below their peak. Again, we turn to Dante Chinni for insight about what’s going on.

The Great Recession took a toll on the country as a whole, but it had special implications for older workers, pushing them back into the workplace. While the number of Americans in the workforce as a whole declined between 2008 and 2012—from 64% to 60%—the percentage of older Americans in the workforce actually grew, if only slightly. Between 2008 and 2012, the percentage of 60-plus aged Americans working full- or part-time inched up from 26% to 27%. Among those 65 or older, the percentage in the workforce grew slightly more, from 16% to 18%. One reason: the collapse of the stock market dealt a major blow to older Americans living off of retirement accounts with investments tied to the markets.

— Dante Chinni Author of Our Patchwork Nation

Best-laid Plans

Though we may want to work longer, many of us have to hang it up earlier than planned—sometimes for health or family reasons—often, because we’ve lost a job and can’t find another.

69-year-old bike store owner Mike Kemp would continue to work if his health would allow it.

Unemployed But Wanting to Work

Older workers who lose their jobs have a harder time finding employment than their younger peers. In a survey after the onset of the recession, almost twice as many younger workers had found a full-time job than those who were 55 or older. And of the older workers who did find jobs, half were forced to take a pay cut.

Why is it harder for older folks who want to keep working to land a job? Economist Julie Zissimopoulos of the University of Southern California:

About half of unemployed middle aged and older workers are still unemployed two years later. If you are near retirement and an employer wants to hire you, there’s fixed costs to hiring you. They have to train you. They have to invest in you and if their investment is only going to be spread over a few years then that might not be the best investment for them compared to a worker where that investment might be spread over many more years.

— Julie Zissimopoulos Economist, University of Southern California


The Sloan Center is funded by the Alfred P. Sloan Foundation,
which is an underwriter of this project and the PBS NewsHour.

PBS NewsHour: Content and Editorial

Design and Development: Ocupop

Header Photo

Chapter Title Photos from Flickr users






Center for Retirement Research at Boston College


The Economist

The Employee Benefit Research Institute (EBRI)

MSN Money

National Bureau of Economic Research

The New York Times

The Pew Charitable Trusts

Pew Research Center

Pew Research Social & Demographic Trends

Retirement Security Project; Senate Committee on Health, Education, Labor, and Pensions

The Schwartz Center for Economic Policy Analysis

Social Security Administration


The Washington Post