Virginia Taxpayers Could Bear Financial Brunt of States Retirement Savings Deficiencies

Overview

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

As in the rest of the country, the number of vulnerable older households in Virginia—those aged 65 and older with less than $75,000 in annual income—is expected to increase by 25% from 2020 to 2035, while the working age population will only grow by 5%. As Virginia 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 also will put pressure on public spending and increase taxpayer burdens. According to The Pew Charitable Trusts in consultation with Econsult Solutions Inc., Virginia can expect to spend an additional $11.8 billion from 2020 to 2035 on costs such as Medicaid¹ because of insufficient retiree savings.² This obligation will be borne by an ever-smaller share of the overall population. The aged dependency ratio—the ratio of households age 65 and older to those of working age—is expected to grow by nearly 24%, further stretching the tax base. In 2020, there were 34 households age 65 and over for every 100 households ages 20-64. In 2035, that number will grow to 43 households age 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 $1,930³ a year—or about $40 a week—over this 15-year period, they could erase the retirement savings gap and allow for a retirement without lifestyle changes driven by inadequate savings.

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