Pennsylvania's Looming $17.8 Billion Fiscal Shortfall

An interactive look at how a lack of retirement savings is straining the state’s safety net

Overview

Although most Americans save for retirement through employer-provided retirement plans, nationwide nearly half of workers in the private sector lack access to retirement savings at work. In Pennsylvania, as many as 2 million workers are in this category. With many employers, including small businesses, unable to provide retirement benefits due to high startup costs and lack of administrative capacity, Pennsylvania must grapple with a key question: What happens when residents don’t have enough money to retire?

Pennsylvania’s population age 65 and over is projected to grow from 2.49 million in 2020 to 3.04 million in 2035, and the number of the state’s vulnerable older households—those 65 and older with less than $75,000 in annual income—is expected to increase by 17% during that time. Due to a lack of workplace savings options, many such vulnerable households risk having insufficient savings in retirement.1 Working with Econsult Solutions, an economic consulting firm, The Pew Charitable Trusts found that these saving shortfalls will lead to increased pressure on public assistance programs,2 reduced tax revenue, and decreased household spending by retirees while shifting the growing fiscal burden to a shrinking population of working-age taxpayers. The analysis showed that the end result for Pennsylvania will be:

  • $14.6 billion3 in increased state spending from 2020 to 2035.
  • $3.2 billion in lost state tax revenue from 2020 to 2035.
  • 63% of older households will have an annual income of less than $75,000, and will face an expected average annual income shortfall of about $7,800 relative to recommended levels of savings.
  • In 2020, there were 43 households age 65 and older for every 100 age 20-64; by 2035, that number will grow to 56 households age 65 and older for every 100 working-age households—a 29% increase—meaning that there will be fewer taxpaying households age 20-64 to support a growing elderly population.

The Pennsylvania legislature is considering legislation to establish a program for private sector workers who lack a retirement savings benefit through their employer. Like other automated savings programs throughout the country, Keystone Saves would automatically enroll workers in a voluntary individual savings account (IRA) program in which they could make regular contributions via direct deposit (workers can opt out or change their contribution level at any time). It is estimated that Keystone Saves could help Pennsylvania reduce state spending by nearly $1 billion annually.4

National Homeownership Month

Fact Sheet

PA's Keystone Saves Program Would Reduce Taxpayer Burden

Quick View
Fact Sheet

Retirement security is dependent on people saving through a plan provided by their employer, but millions of Americans lack access to this benefit. Although many employers want to help their workers save for retirement, they cannot afford the startup costs of a plan. This lack of access and savings also affects taxpayers.

Select which measure to visualize on the map:

Cumulative additional taxpayer liability due to insufficient savings per household, 2020 to 2035

$1,970$5,820

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 2020 baseline, Adams County can expect to see the following as a result of an aging population through 2035 (and as compared to statewide results):

Pennsylvania
Adams
17% 14%
14% increase
Change in vulnerable older households, 2020 to 2035
$7,810 $6,760
$6,760
Average annual income shortfall for vulnerable older households, 2035
29% 40%
40% increase
Change in the ratio of older to working-age households, 2020 to 2035
$4,170 $3,660
$3,660
Cumulative additional taxpayer liability due to insufficient savings per household, 2020 to 2035
$1,890 $1,630
$1,630 a year
or $136 a month
Additional household savings required for adequate savings in retirement, 2020 to 2035

In 2035, on average, Adams County’s vulnerable older households can expect an annual income shortfall of $6,760 due to insufficient savings. To maintain existing social services to older residents, county households on average will be on the hook for a cumulative $3,660 in additional taxes from 2020 to 2035. The burden is exacerbated by the fact that the age dependency ratio—the number of households age 65 and older divided by the number of those age 20-64—will rise by 40%.

However, additional household savings of just $1,630 a year—$136 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 change Age dependency ratio increase Average income shortfall Additional savings required
Pennsylvania
4,170
17
29
7,810
1,890
Adams
3,660
14
40
6,760
1,630
Allegheny
4,650
9
19
7,710
1,860
Armstrong
4,090
16
47
6,770
1,640
Beaver
3,730
9
32
7,830
1,890
Bedford
3,380
12
33
7,590
1,830
Berks
3,700
14
30
8,470
2,050
Blair
5,080
18
28
6,830
1,650
Bradford
4,210
20
30
7,800
1,880
Bucks
5,260
8
60
8,870
2,140
Butler
4,840
11
47
7,520
1,820
Cambria
3,670
8
17
7,230
1,750
Cameron
4,480
0
41
8,110
1,960
Carbon
4,070
6
42
7,200
1,740
Centre
2,800
15
12
7,050
1,700
Chester
5,530
2
46
9,090
2,200
Clarion
3,430
16
27
7,260
1,750
Clearfield
3,420
16
35
7,470
1,800
Clinton
3,390
5
5
7,660
1,850
Columbia
3,390
3
17
7,590
1,830
Crawford
3,330
20
31
7,090
1,710
Cumberland
4,570
13
20
8,030
1,940
Dauphin
4,680
26
34
7,450
1,800
Delaware
4,660
22
35
8,390
2,030
Elk
4,140
19
62
7,520
1,820
Erie
3,500
20
25
7,640
1,850
Fayette
3,750
23
28
6,900
1,670
Forest
1,970
2
4
6,990
1,690
Franklin
3,540
21
25
6,970
1,680
Fulton
3,170
24
29
6,620
1,600
Greene
3,720
25
25
6,740
1,630
Huntingdon
2,670
10
11
7,230
1,750
Indiana
3,180
16
9
7,050
1,700
Jefferson
3,440
16
33
7,230
1,750
Juniata
3,230
25
41
7,560
1,830
Lackawanna
4,130
19
20
7,670
1,850
Lancaster
4,080
16
21
7,620
1,840
Lawrence
3,670
9
27
7,640
1,840
Lebanon
3,980
18
27
7,770
1,880
Lehigh
4,130
17
34
8,330
2,010
Luzerne
3,870
17
27
7,470
1,810
Lycoming
3,740
23
25
6,800
1,640
McKean
3,580
20
33
7,000
1,690
Mercer
3,450
10
19
7,420
1,790
Mifflin
3,540
8
15
6,490
1,570
Monroe
3,350
34
62
7,380
1,780
Montgomery
5,820
4
39
9,170
2,210
Montour
4,720
-1
10
8,260
2,000
Northampton
4,030
12
37
7,800
1,880
Northumberland
3,640
11
26
7,580
1,830
Perry
3,170
12
36
7,380
1,780
Philadelphia
3,280
43
20
7,190
1,740
Pike
3,430
17
56
6,710
1,620
Potter
3,750
15
13
7,280
1,760
Schuylkill
3,600
15
21
7,810
1,890
Snyder
3,220
11
29
7,340
1,770
Somerset
3,360
13
27
6,560
1,580
Sullivan
4,000
-5
22
7,660
1,850
Susquehanna
4,260
16
38
6,330
1,530
Tioga
3,350
13
23
7,000
1,690
Union
2,940
0
15
8,420
2,030
Venango
3,450
20
34
6,720
1,620
Warren
3,940
17
45
7,510
1,810
Washington
4,800
12
37
7,420
1,790
Wayne
3,460
10
31
6,180
1,490
Westmoreland
4,590
10
39
7,600
1,840
Wyoming
4,140
13
33
6,940
1,680
York
3,910
19
41
8,240
1,990

Endnotes

1. Sufficient income for residents age 65 and over is defined as 75% of their annual income between ages 50 to 64, 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.

2. These programs include 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.

3. All dollar amounts in this publication are in 2020 dollars and do not account for inflation.

4. Another Pew fact sheet provides further details on the fiscal impact of Pennsylvania’s lack of savings.

Composite image of modern city network communication concept

Learn the Basics of Broadband from Our Limited Series

Sign up for our four-week email course on Broadband Basics

Quick View

How does broadband internet reach our homes, phones, and tablets? What kind of infrastructure connects us all together? What are the major barriers to broadband access for American communities?

What Is Antibiotic Resistance—and How Can We Fight It?

Sign up for our four-week email series The Race Against Resistance.

Quick View

Antibiotic-resistant bacteria, also known as “superbugs,” are a major threat to modern medicine. But how does resistance work, and what can we do to slow the spread? Read personal stories, expert accounts, and more for the answers to those questions in our four-week email series: Slowing Superbugs.