Half of all private-sector workers lack access to a retirement plan

Americans are continually encouraged to sock away money in a 401(k) or other retirement plan to ensure a comfortable, if not cushy, life in their later years. Yet about half of all U.S. workers in the private sector lack access to an employer-sponsored retirement plan, a huge obstacle in building enough wealth to retire, a recent study finds.

About 56 million workers at businesses across the U.S. are unable to save via a retirement plan through their jobs, according to the analysis from the Pew Charitable Trusts. And while these employees can in principle save money on their own, many are forced to prioritize putting food on the table and paying the bills in the present over building a nest egg for the future, the study found.

The findings underscore the widening divide between the retirement haves and have-nots, with almost 30% of Americans over age 59 lacking any savings to fall back on when they stop working. Employer-sponsored accounts like 401(k)s can help workers save because the money is taken out of paychecks automatically on a pre-tax basis, while many employers also provide a company match, which helps boost savings.

“Deeply unequal”

“Pew’s findings confirm what we’ve known for years: America’s retirement system is deeply unequal,” retirement expert Teresa Ghilarducci, a labor economist and professor at the New School for Social Research, told CBS MoneyWatch.

She added, “Nearly half of private sector workers — 56 million people — lack access to workplace retirement plans. When we include gig, cash and many public-sector workers, the number grows to a staggering 83 million. That’s not a gap — it’s a crisis.”

About 70% of all U.S. retirement assets are held in employer-sponsored defined contribution plans or defined benefit plans, including 401(k)s and pensions, as well as in government-sponsored plans, the Congressional Research Service found in a 2023 analysis. The remainder is tucked away in individual retirement accounts, or IRAs.

While it’s possible to save for retirement without a 401(k), many workers without access to these plans said they faced barriers to building wealth, the Pew survey found. For instance, one-third of workers without access to an employer-sponsored retirement account said they didn’t have any money left over after the end of the month.

“To build wealth and achieve financial security, individuals and families need a convenient and effective way to accumulate assets,” Pew noted in its analysis. “Research shows that individuals are 15 times more likely to save for retirement if money is deducted automatically from their paychecks.”

Other researchers have highlighted the gaping holes in the American retirement system. For example, one 2023 analysis from the Economic Innovation Group found that 70% of low-income workers, or those earning $37,000 or less, lack employer-sponsored plans.

Creaking Social Security system

While financial gurus often exhort Americans to prepare for the time they can no longer work, the Pew research makes clear that people without access to a retirement plan face significant hurdles to achieving financial security, Ghilarducci noted.

“What the Pew report confirms, and what we experts knew for years, is that saving for retirement isn’t much about personal responsibility as it is about access,” she said.

Ghilarducci added, “Without a workplace plan, even the most disciplined and financially educated worker faces structural disadvantages for saving.”

The Pew research underscores that millions of Americans will approach their retirement years reliant on Social Security as their primary — or even only — source of income in old age. At the same time, the Social Security program is on track to deplete its trust funds by 2034, one year sooner than previously forecast.

At that point, roughly 70 million Social Security recipients would see their monthly benefits cut by about 20%. That would likely create financial hardship for the roughly 40% of Social Security beneficiaries who today rely on the program as their sole source of income.

Although lawmakers still have time overhaul the program to strengthen its finances, Congress has yet to take steps to shore up Social Security.

“The Pew report is a wake-up call,” Ghilarducci said. “If Congress fails to act, the people most harmed are those who can least afford it — workers without retirement accounts and pensions, gig workers, and those earning low wages.”

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