A ‘tale of two retirements’ shows only the rich are saving more — while most Americans are putting away much less

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There’s a stark divide among Americans when it comes to retirement savings. Most U.S. workers struggle to save and invest for their older years, putting themselves at risk of running out of money before they die. Only a small minority with high salaries is able to increase their retirement savings and see their investments grow.

Since 2022, retirement-plan participation rates, total contributions and overall savings rates have decreased for those making less than $150,000 a year, according to a new study from Dayforce Inc. DAY, which provides a system for managing human resources, payroll, attendance and benefits. The only salary group that showed improvements were the upper echelons of people making more than that threshold, the study found.

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That means the bulk of Americans cut back on their retirement savings. About 90% of U.S. individuals age 15 and older earned less than $150,000 in 2022, according to the U.S. Census Bureau.

Teresa Ghilarducci, a professor of economics and policy analysis at the New School in New York City and an expert on retirement, refers to this phenomenon as “the tale of two retirements.”

“People with higher earnings tend to have jobs that are less physically demanding, more flexible and more protected. They can choose to work longer or stop when they want,” Ghilarducci said. “By contrast, workers in the bottom 90% are much more likely to be in physically demanding or unstable jobs. Their bodies are worn down earlier, their employers often want younger workers, and yet they also have less wealth and less retirement income to draw on.”

Workers making less than $50,000 saw the steepest drops — with participation in an employer or individual retirement plan moving from 58% in 2022 to 52.9% in 2024, and their overall savings rate dropping from 4.9% to 4.6% over that time, Dayforce found.

In fact, workers earning $150,000 to $250,000 a year contributed nearly 13 times more money toward retirement each year than those earning under $50,000, the study found.

“We believe this research should serve as both a wake-up call and a call to action,” said Jason Rahlan, global head of sustainability and impact at Dayforce. “For far too many people, the promise of a secure retirement is drifting further out of reach.”

The Dayforce study comes as Americans grapple with higher housing, healthcare, transportation and childcare costs — all immediate needs that can push retirement savings to the back burner. By postponing saving for retirement, people have less time to save and lack the benefit of compound growth, reducing their overall retirement savings and making them more likely to outlive their money as longevity increases.

Joanna Lahey, a professor at the Bush School of Government and Public Service at Texas A&M University and an expert on age discrimination and the labor market, said she believes the retirement outlook for the bulk of workers is even worse than the Dayforce study found.

“Dedicated retirement savings aren’t how most people in the U.S. generate retirement income, so things are even worse,” Lahey said. “The main form of most people’s retirement savings — except the very wealthy — is their house, not the market. Lower-income people are less likely to be homeowners and they tend to have less home equity. They’re less likely to be able to sell their homes or do a reverse mortgage and live off the proceeds.”

Lahey underscored the notion that lower-income people are more likely to retire at age 62 because they tend to be in jobs that are more physically demanding and they tend to have worse health.

“Unfortunately, that usually means that they also take Social Security at the early retirement age of 62, instead of at full retirement age — which means they are getting less money each month than if they had waited. Higher-income earners tend to have jobs that can continue to be worked at, which means they can put off claiming Social Security and thus get higher benefits.” Lahey said.

As of late 2024, people with household income of less than $50,000 had saved a median of $2,000 in household retirement accounts, while those with household income of $50,000 to $99,000 had saved $33,000, according to research by the nonprofit Transamerica Institute and the Transamerica Center for Retirement Studies. At the upper end, those with household incomes of $100,000 to $199,000 had saved $147,000, and those with household incomes of more than $200,000 saved $565,000, according to Transamerica.

Among household incomes of less than $50,000, 1 in 3 people had no savings in retirement accounts, while 1 in 3 with household incomes of $200,000 had saved $1 million or more, Transamerica found.

“People with lower incomes are financially stretched, and are at a disadvantage to save for retirement and more likely to have a heavy reliance on Social Security,” said Catherine Collinson, chief executive and president of the nonprofit Transamerica Institute and the Transamerica Center for Retirement Studies.

Social Security itself faces a financial crisis unless action is taken by Congress. The trust funds that back Social Security are projected to be depleted in 2033, at which point the fund would pay out only 77% of scheduled benefits.

Americans need warning about any potential reforms to Social Security so they can plan their retirements, Collinson said. However, the last time major changes were made to Social Security, it occurred at the 11th hour in the 1980s.

“If the retirement system continues as it is, there will be increased elder poverty,” said Matt Bahl, vice president at the Financial Health Network. “It’s going to be harder and harder for people not earning high six figures to save for retirement.”

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