Retirement Retirement Planning

Experts Warn the Next Retirement Crisis May Already Be Starting - Here's What to Know

Entering retirement financially unprepared can spell disaster.

By Chris Lewis, CEPF , Edited by Laura Hohenstein

Updated April 30, 2026

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Warnings about a looming retirement crisis aren't new. They have been around for years, but they've been easy to ignore as belonging to the future. New data suggests the problem may already be here.

A growing number of Americans are reaching retirement age with limited savings, rising expenses, and an increasing dependence on Social Security benefits that were never designed to support them fully. The result is a widening gap between what retirees need for a stress-free retirement and what they actually have.

Here's what the numbers and real-life scenarios reveal.

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Entering retirement with little or no savings

One of the obvious warning signs of this crisis is how many Americans are reaching retirement age without adequate savings. In June 2025, Gallup found that 40% of U.S. adults have no retirement savings.

Those who save don't have enough to sustain long-term expenses. The median retirement savings for working-age Americans is just $955, according to the National Institute on Retirement Security, as reported by CBS.

There are multiple reasons, but the main factor is that access to employer-sponsored pensions has dropped significantly over the past few decades, leaving workers responsible for funding their own retirement. Worse, many still lack access to these retirement plans.

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What it looks like in real life

To understand how this works, let's look at James. He's 62 and only started saving for retirement recently. He has about $120,000 in a 401(k) (below the recommended threshold). He plans to delay retirement to build up savings and maximize his Social Security benefits. Still, even working a few extra years may not fully close the gap.

Too much dependence on Social Security

As savings fall short, retirees are leaning more on Social Security benefits. Gallup found that 62% of retirees used Social Security as a major source of income in 2025. Another study reveals that 72% of Baby Boomers did the same.

The average monthly benefit is roughly $2,000, and Social Security has never been designed to replace income. As a result, it isn't enough on its own. It typically replaces about 40% of pre-retirement earnings, while the average retiree needs 70%–80% to maintain their lifestyle.

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What it looks like in real life

Many seniors are part of this growing group. With little in savings, Social Security makes up the majority of their income. While the benefits cover basic needs, the first unexpected expense, like a home repair or medical emergency, can put them in the red.

A growing retirement income gap

Experts call the mismatch between income and needs the retirement income gap. The median retirement income is $56,860, according to the 2025 Current Population Survey. Averages run closer to $80,000 because wealthier households skew the data.

Financial experts recommend replacing around 80% of pre-retirement income to maintain a similar standard of living. Since benefits only replace 40%, savings must fill the gap, and many households simply don't have enough. You may think 40% is sufficient for a modest lifestyle, but without additional savings, it becomes a struggle.

Rising costs

Even retirees who planned carefully are facing new financial pressure. According to the latest data, people age 65 or older spend an average of $61,432 per year. The largest expenses are housing, transportation, and food, which have risen faster than general inflation in recent years. Compare this to the median retirement income above, and it's clear why rising costs are putting pressure on fixed incomes.

The Employee Benefit Research Institute reported that 31% of retirees are spending more than they can afford.

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What it looks like in real life

In real life, we could have Davin and Susan, both 70, who had $500,000 in savings five years ago. Rising costs, especially health care and insurance, have forced them to withdraw more than expected each year. On average, Americans are living longer, needing their savings to last 20 to 30 years or more. The couple is now concerned their savings won't last through their 80s.

Uneven wealth gains

When it comes to retirement, headlines often highlight rising net worth and record investment assets, but don't discuss the real issue: These gains aren't evenly distributed. As expected, higher-income households are generally well-prepared for retirement.

Yet, many middle- and lower-income households face significant saving gaps and income shortfalls, creating a growing divide between financially secure retirees and those struggling to keep up.

The large numbers of retirees who rely mainly on Social Security are the hardest hit.

What it looks like in real life

Consider a 68-year-old homeowner who bought their house decades ago. Their home has doubled in value, pushing their net worth into six figures.

Most of that wealth is tied up in their property, rather than cash they can easily spend. As such, their monthly income may consist of a Social Security check. After covering property taxes, utilities, and groceries, there isn't much left over.

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What could help alleviate this crisis?

The biggest opportunity to avoid a full-fledged crisis is expanding access to retirement plans. Programs that automatically enroll workers in savings plans increase participation rates.

Increasing your savings can make a difference. Many financial experts recommend setting aside at least 10%–15% of income for retirement.

Another strategy is delaying retirement. Waiting to claim Social Security can increase benefits by about 8% per year after full retirement age.

At a broader level, policy changes are needed, particularly around how Social Security benefits are calculated and funded.

Bottom line

The idea of a future retirement crisis isn't new, but the fact that it may already be here is. Millions of Americans have little or no savings. Social Security is being stretched beyond its intended role. With costs rising faster than expected and financial outcomes increasingly uneven, the crisis becomes obvious.

There's no single fix, but personal changes, such as saving more, could help close the gap and eliminate some money stress during your golden years. While telling retirees to live within their means may come across as sound-deaf, it's the only good piece of advice in the absence of meaningful policy changes.

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