Retirement Savings Gaps May Increase Burden on Pennsylvania Taxpayers

Data shows saving as little as $25 a week can ensure retirement security

Retirement Savings Gaps Burden on Pennsylvania Taxpayers

Overview

Workers in the United States accumulate the vast majority of their retirement savings through employer-based plans, but large gaps in coverage exist. Pennsylvania is no exception, with about 1 in 3 workers lacking access to a workplace plan.

As in the rest of the country, Pennsylvania’s vulnerable older households—people aged 65 and older with less than $75,000 in annual income—are expected to increase by 27% from 2015 to 2030. As Pennsylvania workers age, inadequate retirement savings not only will force a reduction in the quality of life for many of them entering their golden years but will also put pressure on public spending and increase taxpayer burdens. According to The Pew Charitable Trusts in consultation with Econsult Solutions Inc., from a 2015 baseline through 2030, Pennsylvania can expect to see an additional $14.3 billion in state spending, such as from Medicaid,1 due to insufficient savings.2 This obligation will be borne by an ever-smaller share of the overall population. The aged dependency ratio—the ratio of those households 65 and older to those of working age—is expected to grow by nearly 50%, further stretching the tax base. In 2015, there were 38 households aged 65 and over for every 100 households aged 20-64. In 2030, that number will grow to 57 households aged 65 and over for every 100 working-age households.

Fortunately, even small savings now could offset the shortfall. The study finds that if households saved just $1,1703 a year—or about $98 a month—over this 15-year period, they could completely erase the retirement savings gap and allow for a retirement without lifestyle changes driven by inadequate savings.

States of Innovation

Select which measure to visualize on the map:

Cumulative additional taxpayer liability due to insufficient savings, 2015–30

$2,121$5,261

Erie

Susquehanna

Warren

McKean

Bradford

Tioga

Potter

Crawford

Wayne

Wyoming

Forest

Lack-

awan-

na

Sullivan

Cameron

Elk

Venango

Pike

Lycoming

Mercer

Clinton

Clarion

Luzerne

Jefferson

Monroe

Columbia

Law-

rence

Mon-

tour

Clearfield

Union

Carbon

Butler

Centre

North-

umber-

land

Armstrong

North-

ampton

Snyder

Beaver

Schuylkill

Indiana

Lehigh

Mifflin

Juniata

Allegheny

Cambria

Blair

Berks

Dauphin

Huntingdon

Perry

Bucks

Lebanon

Westmoreland

Mont-

gomery

Washington

Cumberland

Lancaster

Phila-

delphia

Bedford

Chester

Somerset

Delaware

Fayette

York

Franklin

Fulton

Greene

Adams

From a 2015 baseline, Adams County can expect to see the following as a result of an aging population through 2030 (and as compared to statewide results):

Pennsylvania
Adams
27% 31%
31%
Increase in vulnerable older households, 2015–30
$4,840 $3,980
$3,980
Average annual income shortfall for vulnerable older households, 2030
48% 54%
54% increase
Change in the ratio of older to working-age households, 2015–30
$4,009 $3,472
$3,472
Cumulative additional taxpayer liability due to insufficient savings, 2015–30
$1,170 $960
$960 a year
or $80 a month
Additional household savings required for adequate savings in retirement, 2015–30

In 2030, on average, Adams County’s vulnerable older households can expect an annual income shortfall of $3,980 due to insufficient savings. Without new saving, county taxpayers will need to pay a cumulative $3,472 from 2015 to 2030 to maintain existing social services to older residents. The burden is exacerbated by the fact that the aged dependency ratio—the number of aged 65 and older households to households aged 20-64—will rise by 54%.

However, household savings of just $960 a year—$80 a month—over this period can erase the gap and allow for a retirement without lifestyle changes driven by inadequate savings.

Legend: statewide average line
County Taxpayer burden Vulnerable household increase Dependency ratio increase Average income shortfall Additional savings required
Pennsylvania
4,009
27
48
4,840
1,170
Adams
3,472
31
54
3,980
960
Allegheny
4,393
20
44
4,800
1,160
Armstrong
3,595
23
68
4,260
1,030
Beaver
3,665
22
54
4,810
1,160
Bedford
3,249
29
47
4,330
1,050
Berks
3,732
26
42
5,300
1,280
Blair
4,885
28
51
4,260
1,030
Bradford
4,136
30
53
4,390
1,060
Bucks
4,668
18
80
5,800
1,400
Butler
4,443
24
64
4,640
1,120
Cambria
3,763
20
41
4,310
1,040
Cameron
4,449
22
92
4,780
1,150
Carbon
4,183
26
62
4,220
1,020
Centre
3,033
29
31
4,210
1,020
Chester
4,956
16
64
5,940
1,440
Clarion
3,560
40
53
4,160
1,000
Clearfield
3,564
32
45
4,450
1,070
Clinton
3,546
22
31
4,290
1,040
Columbia
3,736
16
38
4,580
1,110
Crawford
3,284
29
54
4,420
1,070
Cumberland
4,457
24
38
4,800
1,160
Dauphin
4,388
46
62
4,520
1,090
Delaware
4,402
29
55
5,020
1,210
Elk
3,912
17
65
5,040
1,220
Erie
3,441
36
49
4,740
1,150
Fayette
3,627
33
49
4,160
1,000
Forest
2,121
12
26
3,740
900
Franklin
3,398
26
37
4,310
1,040
Fulton
3,311
28
37
4,100
990
Greene
3,793
32
49
4,160
1,000
Huntingdon
2,847
25
22
4,450
1,070
Indiana
3,350
29
37
4,070
980
Jefferson
3,549
24
52
4,550
1,100
Juniata
3,697
34
52
4,430
1,070
Lackawanna
4,166
20
36
4,850
1,170
Lancaster
3,899
24
39
4,890
1,180
Lawrence
3,605
21
47
4,610
1,110
Lebanon
3,805
27
44
4,720
1,140
Lehigh
3,934
29
48
5,070
1,220
Luzerne
3,940
19
41
4,680
1,130
Lycoming
3,706
31
47
4,220
1,020
McKean
3,311
38
52
4,000
970
Mercer
3,462
17
37
4,270
1,030
Mifflin
3,456
13
24
4,050
980
Monroe
3,144
53
77
4,680
1,130
Montgomery
5,227
15
54
5,750
1,390
Montour
5,261
5
32
4,470
1,080
Northampton
3,736
22
52
4,970
1,200
Northumberland
3,637
24
43
4,480
1,080
Perry
3,083
32
65
4,710
1,140
Philadelphia
3,317
49
40
4,460
1,080
Pike
3,304
40
59
3,820
920
Potter
3,349
25
32
4,820
1,170
Schuylkill
3,783
22
33
4,670
1,130
Snyder
3,252
28
39
4,420
1,070
Somerset
3,287
20
47
4,160
1,000
Sullivan
4,012
10
62
4,750
1,150
Susquehanna
4,356
31
57
3,850
930
Tioga
3,538
26
45
4,230
1,020
Union
3,244
12
26
4,830
1,170
Venango
3,359
39
65
4,170
1,010
Warren
3,844
32
69
4,460
1,080
Washington
4,586
20
60
4,650
1,120
Wayne
3,515
32
47
3,680
890
Westmoreland
4,373
16
56
4,660
1,130
Wyoming
4,199
39
62
4,290
1,040
York
3,656
32
57
5,070
1,220

Notes

1. Program spending includes Medicaid (long-term care, home and community-based services, long-term managed care, payment for Medicare drug program, and other Medicaid expenditures); PennCARE; property tax and rent rebates; PACE and PACENET; and free and reduced fare transit.

2. Sufficient income for residents aged 65 and over is defined as 75% of their annual working age (50-64) income, with a minimum retirement income of the federal poverty level. Incomes above $75,000 for older residents are considered sufficient regardless of the proportion of working-age income replaced.

3. All dollar amounts in this publication are in 2015 dollars and do not account for inflation.