Social Security What's Buzzing

Is it fair to say we have a retirement crisis?

Written by Diane Archer

It is easy to find policymakers and thought leaders who deny we have a retirement crisis. But there’s no denying that the overwhelming majority of people face a sharp drop in income at retirement. The Economic Policy Institute, a Washington think tank, has a new report that highlights how middle-income families have lost significant assets since the Great Recession.

The EPI analysis shows that today fewer people have defined benefit pensions to rely on.  And Social Security payments are not replacing as much of people’s working income as it once did.  Moreover, 401k-style defined contribution plans and IRAs, are not growing nor anywhere near making up for these losses.  They have “failed most American workers.”

Rather, EPI reveals that the households near retirement during the Great Recession took a significant financial hit. On average, they lost nearly a quarter of their savings. But, these losses hurt the wealthiest Americans far less than everyone else, contributing to greater retirement inequality. Median families (those in the 50th percentile) lost more than half of their retirement savings between 2007 and 2010. Families in the 90th percentile only lost 5 percent.

Other notable findings from EPI:

  • Total wealth has shrunk for 80 percent of people over the last several decades. So, they do not have as much available to spend for retirement.
  • Most people at the bottom half of the income distribution have no retirement savings; since 2000, fewer working age families have retirement savings except among top income earners.
  • Single women are particularly vulnerable because they tend to earn less, have less savings and live longer than men, often outliving their savings.
  • Half of near-retirees have no retirement savings at all and those with savings have median savings of $17,000. Before the recession, they had more than twice that amount, about $36,000.
  • Retirees are also seeing cuts to Social Security benefits, which were passed in 1983 but are still taking effect in the form of a slowly rising retirement age, from 65-67.

And, because older adults and people with disabilities typically can count on Medicare to cover only about half of their health care costs, their expenses can be very high. Medicare does not cover nursing home care or other long-term services and supports.  

What’s the solution? Here are three ways government can help promote retirement security Expanding Social Security benefits would help a lot, particularly for people with low incomes and in poor health.Teresa Ghilarducci explains the value of Guaranteed Retirement Accounts herePeople who are in good health and who can find work are best off if they continue working and put off collecting Social Security until age 70. Their benefits will increase substantially.  

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4 Comments

  • …sadly because of unchecked ageism in hiring and job retention, it is difficult for many to push back SS retirement to 70. The trend in jobs for those without a four year degree is lower and lower wages. Wages in many non and semi skilled positions have been falling. For example a warehouse position I held back in 1972 (which just involved packaging and shipping), paid 6.85$ an hour. Based on inflation, a similar position today should be paying about 38$ an hour. I recently left a very similar job after 18 years, similar except for the fact I had far more responsibility as I co-managed 2 departments as well as the account for company’s most important client. My last wage there: 11:50$ an hour which would equate to about 2.03$ in purchasing power in 1972 (which is less than what my state’s minimum wage was back then).

    Not easy to put away money for retirement on that kind of pay especially when there are other expenses like rent (which where I live has been skyrocketing), transportation, food, clothing and other necessities. I actually had to opt out of our company’s health plan so I could afford a monthly transit pass to get to work.

    Another issue many (including those in government circles) don’t consider is that low wages also mean lower SS and medicare benefits upon retirement as these are based on how much is paid into one’s “account”. So it is kind of a double whammy. Not only are low paid workers unable to put money away on their own, but what benefits they can receive are affected as well.

    The issue with 401Ks is they are susceptible to market swings so they are not a stable investment. When the recession hit, many who had invested in 401Ks lost big. I know one person who’s account has pretty much stagnated for the last year. The only ones really benefiting are the speculators.

    This nation is heading towards becoming an impoverished society as wages for many continue to stagnate while living costs continue to increase. While the government refuses to give Social Security recipients a cost of living increase this year it is poised to give hundreds of billions in tax forgiveness to corporations with profits held overseas. If that isn’t corporate welfare in the extreme, well, I have a dozen bridges in Portland OR to sell.

    I wonder just what programmes will be adversely affected by this lost revenue as the shortfall will need to be made up somewhere (and you can bet it won’t be the Pentagon). Oh, and it isn’t just the Republicans either, as democratic leaders and even the President are on board with the plan. They can find it easy to forgive corporations that turned their backs on this nation and its workers but for this nation’s impoverished senior and disabled citizens, we’re “on our own”.

    It’s no wonder why so many on both sides of the political fence are clamoring for change.

    • Very well said. Having lived in Vermont and known Bernie Sanders since he was a Congressman, I feel confident in saying that he really gets it. But he will need a Congress willing to address the problem(s).

    • You described the situation very accurately. I lost my last real job in June 2008, when I was 58 and I made $20 hr. I got a temporary job for six months in 2010 and since 2011 I have only been able to find work as a school crossing guard. I will be 66 next week. Fortunately my husband has been consistently employed, although he makes less than he used to and our house is almost paid off. But even when I retire (?) at 70, I will have had 12 years of minimal Social Security earnings. (I will say our–that is, my–401ks have lost a minimal amount in value because I am extremely conservative and we do have a few IRAs, but that’s about it.) The anger I feel is very strong. I was willing to work and it’s not my fault the economy tanked, but people like us bear the burden and the banks got bailed out. I’m for a guaranteed annual income for everyone who doesn’t make at least $50,000 a year. Cut defense, for crying out loud…

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