(Bloomberg) — Tim Egan has been working since he was 14. He's now 56 and has spent most of his career as a restaurant manager. He has virtually nothing saved for retirement and, until last month, never had a 401(k) account.
Little wonder: Only two of the 20 restaurants where Egan has worked in the past four decades had retirement savings plans.
"The restaurant business is what I'm good at, but few owners, especially of small places, offer retirement benefits, no matter how much money you help them earn," says Egan, who worked his way up from dishwasher to waiter to bartender before rising to manager 20 years ago.
Egan's story isn't unusual among the legions of Americans who work part time, switch jobs frequently or earn their livings at small companies, which generated two-thirds of all new jobs last year. Even as people live longer and must save more for old age than prior generations, most cannot depend on any help from employers. Almost half of U.S. workers didn't have a company-sponsored retirement plan in 2013, compared with 39 percent in 1999, according to an analysis of Census Bureau data by the Schwartz Center for Economic Policy Analysis at the New School for Social Research in New York.
The lack of plans is fueling a retirement savings crisis. Few workers save anything outside of employer-sponsored plans. Only 8 percent of taxpayers eligible to set aside money in an IRA or Roth IRA did so in 2010, according to the IRS.
Egan set up an IRA in his 40s. In a bid to make up for the years he hadn't saved, Egan invested mostly in equities and lost a lot of his savings during the financial crisis. He currently has less than $20,000.
Low-income Americans have long relied mostly on Social Security. Now middle class professionals and managers are increasingly doing the same. But the average Social Security benefit — $15,700 a year — doesn't come close to replacing the earnings of those with mid-five and six-figure salaries.
"There's a huge coverage gap that needs to be addressed," says Debra Whitman, chief public policy officer at AARP, the 37 million-member organization for people 50 and older.
Those most vulnerable include both millennials at startups and managers in their 40s and 50s who've gone from corporate jobs with benefits to small businesses without them. Some 58 percent of the 68 million wage-and-salary workers without a company-sponsored retirement plan in 2013 worked for a business with fewer than 100 employees, according to the Employee Benefit Research Institute.
"The current 401(k) system was designed for a workplace that doesn't exist for most people: lifetime careers at big corporations that offer benefits," says Teresa Ghilarducci, an economist at the New School who researches retirement policies. "Saving consistently — which you need to do for just a modest retirement income — isn't remotely likely."
With 10,000 baby boomers turning 65 each day, concerns are mounting about how to fix a system that excludes so many. There are plenty of ideas but little consensus among government officials, business executives, economists and others.
