For many Americans, the dream of a comfortable retirement is becoming increasingly difficult to achieve, and for some, it may already be slipping away.
According to a recent LendingTree study, the average retiree in one of the 100 largest U.S. metro areas needs $71,407 a year before taxes to cover basic expenses. Yet the average Social Security income in these areas is just $21,500, covering barely 30 percent of that amount.
The gap between what retirees want and need and what they have is widening, and experts say the problem is likely to persist across generations.
Another recent survey by investment banking firm D.A. Davidson, which polled 1,008 U.S. adults 50 years and older, found that 41 percent said they won’t be able to support the retirement lifestyle they envisioned. In recent years, older Americans have been staying in the workforce for longer: a 2023 Pew Research Center report found that around one in five Americans aged 65 and older were still employed at the time, nearly twice as many as 35 years ago.
“For many, [retirement] will never happen,” said Matt Schulz, LendingTree’s chief consumer finance analyst and author of Ask Questions, Save Money, Make More. “Most aren’t fortunate enough to have a seven-figure nest egg or a pension to lean on.”
Instead, Schulz says, retirees are often juggling limited income, rising debt, and retirement accounts with dangerously low balances.
“It’s all going to add up to a challenging situation for retirees and their loved ones in the next 15 to 20 years.”
Composite image created by Newsweek.
Photo-illustration by Newsweek/Getty
The Vanishing Pension
So, how did retirement become such a precarious prospect for today’s Americans?
According to financial experts, a major shift occurred when traditional pensions gave way to 401(k) plans and other self-funded savings options. This shift transferred the responsibility—and the risk—of retirement planning from employers to individuals.
“Shifting from pensions to 401(k)’s is like giving someone keys, but not teaching them how to drive,” Bill Harris, former CEO of TurboTax and PayPal, and founder of Personal Capital, told Newsweek. “Combine that with inconsistent savings habits, and you get a widespread readiness gap.”
Marcus Sturdivant Sr., a senior adviser with The ABC Squared², echoes that sentiment.
“This is the generation that had pensions or employee-sponsored retirements, which were the burden of the company to fulfill,” he said. “Now the focus is on the individual to save…and the advice from already retired parents didn’t translate to this new system.”
The result, Sturdivant warns, is that many Americans simply didn’t save enough, or didn’t know how.
“Flippant attitudes to saving, a culture of decreasing attention spans, and life just sneaking up on people, and they wake up one day closer to retirement age than their early years of life,” he said. “We lost perspective of short-term sacrifice for long-term gains; instant gratification is winning.”
Can (and Should) Social Security Pick Up the Slack?
With personal savings falling short, many Americans have turned to Social Security to support them in their later years. However, experts agree that the program was never intended to bear the entire burden of retirement.
“Social Security was not designed to cover your entire retirement but to supplement it,” Sturdivant said.
Yet for millions, that supplement has become the main source of retirement income. A recent survey by The Senior Citizens League found that more than one-third (39 percent) of Americans rely entirely on Social Security to fund their retirement.
As pressure mounts to address the shortfall, calls to bolster the program are growing louder.
“In principle, yes,” Chad Harmer, founder and CIO at Harmer Wealth Management, told Newsweek when asked if benefits should be increased. “A program that was designed as a floor has slowly become the primary pillar of support for millions.”
But Harmer and others warn of trade-offs.
“Higher benefits without a funding fix accelerate the trust fund’s shortfall,” he noted, and could also reduce personal savings through a “crowding-out” effect. A balanced approach, he said, might involve a “gradual payroll tax bump and a higher wage cap.”
Sturdivant also believes that increases in benefits should be accompanied by improved financial education.
“If we simply give people more money without the tools to use it,” it would likely “be a waste,” he said. “Lifestyle creep is real, and a higher number of seniors, even those in retirement, are running higher credit card debt.”
The Road Ahead
With Social Security strained and retirement savings lagging, experts predict that the coming decades may see more Americans working well into their senior years. Rising life expectancy, stagnant wages, and increasing health care costs may leave many with no other option.
“Many Americans are undersaved, living longer, and facing higher health care and living costs,” Harris warned. “Increasingly, Americans will enter retirement without sufficient savings to maintain their standard of living.”
Harmer agrees. “Health care inflation is outpacing general CPI, long‑term care is eye‑watering, and longevity risk means even modest shortfalls compound over a 25‑ or 30‑year retirement,” he said.
Still, it’s not too late to change course. Harris believes younger Americans can avoid a crisis by taking consistent, intentional steps now.
“It’s not a crisis,” he said. “It’s a call to be intentional.” Contributing to tax-advantaged accounts, staying invested, and working with a financial adviser can all help build genuine financial security.
However, for today’s retirees—and those just a few years away from retirement—the challenge is real. Whether through higher Social Security benefits, smarter financial education, or greater personal savings, experts say the system needs reform, and Americans need a plan.
“Americans will figure this out,” said Sturdivant. “I do not foresee retirement falling off the cliff. But we’re getting closer to the edge.”