By Cheryl Russell, American Consumers Newsletter

In a study of men's incomes over time, researchers for the National Endowment for Financial Education found income shocks to be the norm. Fully 61% of male workers aged 25 to 70 had experienced the loss of an entire year's worth of income at least once. Among older men, such devastating losses are a nearly universal experience...

Percentage of male workers who have lost all earnings for at least one year
Aged 25 to 34: 40%
Aged 35 to 54: 56%
Aged 55 to 61: 75%
Aged 62 to 65: 87%
Aged 66 to 70: 93%

These income shocks lower the retirement savings of workers in the bottom 50 % of the income distribution (with annual earnings of $26,531 or less), who struggle to save money. By linking data from the Survey of Income and Program Participation with Social Security and IRS records, the researchers tracked men's lifetime earnings as well as their contributions to retirement plans and account balances by demographic characteristic.

The researchers found that lower-income men are most likely to experience income shocks – 82% had experienced at least one versus 53% of middle-income men and 45% of high-income men (with annual earnings of $80,040 or more). When lower-income men experience an income shock, their retirement savings take a hit.

For each one-year episode of income loss, workers in the bottom 50% of the income distribution saw their retirement savings decline by an average of $3,786. There was no effect on the retirement savings of men in the top 50% of the income distribution.

“Nearly everyone will suffer multiple income shocks during their working lives,” conclude the researchers. Educators and policymakers should “prepare individuals to expect income shocks and educate them on how to manage and recover from financial setbacks with the least possible impact on their retirement savings.”