(This article originally appeared on Slant.com.)
None of us expected to be here — broke or near broke, unemployed or
underemployed, working part-time at a job we hate with little to nothing
in our savings account.
We grew up thinking retirement meant Florida and golf, not that most of us really wanted that. It definitely
didn’t mean
living in our brother’s basement or in some modest one-bedroom rental.
We never thought in our 50s and 60s we’d be scrimping and scraping,
borrowing money from our adult children or 84-year-old mother.
And yet, here we are…millions of us and millions more on the way.
Excessive
spending is not what landed millions of Americans here. The truth is
for many households, there’s nothing left to save after the bills are
paid.
Half of Households Have No Retirement Savings
How bad is it? According to a May 2015
study by the Government Accountability Office (GAO) on
retirement preparedness, half of American households have no retirement savings at all. That’s zero: no 401(k)s, no IRAs, not a dime.
You’re thinking maybe that’s because near-retirees have a fat pension
stashed away somewhere. You’d be wrong. According to the GAO, around 29
percent of households age 55 and older have neither retirement savings
nor a pension.
And among those who do have some retirement savings, the median value
of retirement accounts for households age 55 to 64 is about $104,000.
Now $104,000 sounds a lot better than zero until you look at the
retirement monthly income this savings would actually generate.
Drum roll please. According to the GAO, your $104,000 nest egg will
generate an inflation-protected annuity of about $310 per month.
I stopped mid-mascara when I heard that.
Even when you add in the average monthly Social Security benefit of $1,335, it’s still depressing.
Why Aren’t Americans Saving More?
There’s a lot of hand wringing about why Americans aren’t saving
more. Blaming and shaming is so deliciously tempting. We’re told that it
is our fault that after a lifetime of work we have not managed to save
the 15 to 20 times our annual salary that financial experts tell us
we’ll need to maintain our current standard of living in retirement.
The same pundits finger wag and chastise us for being poor planners. After all, why on earth would we
draw down our 401(k)
to cover medical expenses, the monthly shortfall on our mother’s
nursing home care, our kid’s education or just to survive? What were we
thinking paying off that credit card debt (or something else; you fill
in the blank)?
But let’s get real.
Excessive spending is
not what landed millions of Americans here. The truth is for many households, there’s just
nothing left to save after the bills are paid.
According to the
Social Security Administration
in 2014, the average U.S. worker’s pay was $44,569. If we set aside in
savings the 20 percent financial experts tell us we’ll need to maintain
our current lifestyle in retirement, we’re left with $35,655 to live on
before taxes.
You might say: hard, but not impossible with some extreme belt tightening.
But here is the kicker. Sixty-seven percent of American workers make
less than the average. The median wage in 2014 was $28,851. Subtract 20
percent, or $5,770 in savings, and you have $23,081 to live on.
FUGEDDABOUTIT.
You’re not going to save on these wages. It barely keeps you above the
federal poverty line of $20,090 for a family of three. And you fall below it at $24,250 for a family of four.
Given this reality, no one should be surprised that more than half of Americans have
less than $1,000 in their checking and savings accounts. This is paycheck-to-paycheck living, one surprise event from financial catastrophe.
The looming retirement income security crisis is also
not caused by “a set of isolated individual behaviors,” according to
Teresa Ghilarducci, a labor economist and leading authority on the economics of retirement.
In other words, we’re not here because we’re a country of
irresponsible slackers or because we overspent on luxury items trying to
keep up with the Joneses.
Squeezed between 30 years of flat and falling wages and escalating
costs in housing, healthcare and education, it’s doubtful that kicking
our daily latte habit (if we had one) would have made much of a
difference in our retirement savings.
America’s Structural Problem
The real problem is structural and baked right into our retirement security system.
The three-legged stool of retirement income we boomers thought we
could count on — Social Security, company pensions and personal savings —
has gone wobbly. With the declining availability of employer-funded
pensions; the inadequacy of 401(k) plans with their steep fees and
dependence on people’s voluntary savings for 40 years; stagnant wages
and the sharp drop in personal savings, many near-retirees are left with
what some experts describe as the “pogo stick” of Social Security to
negotiate their Golden Years.
And how much is that? According to the Social Security
Administration, the average retiree is receiving just $1,335 per month
or $16,020 annually, just above the federal poverty guidelines ($15,930)
for a two-person household.
What this means is that most of us will not be buying that condo in
Costa Rica advertised in glossy retirement living publications. We won’t
be traveling the world anytime soon or forging those remarkable second
and third acts we read about in the popular press. Many of us are facing
a work-for-life proposition, isolated and alone, worried about how
we’re going to survive when our money runs out.
And how big is the shortfall? According to the
Pension Rights Center, the deficit between what Americans have and what we need to retire is $7.7 trillion
Wrap your brain around that number. It assumes we will be spending down ALL of our assets, including home equity.
A Plea to the Presidential Candidates
Now you’d think that a problem of this magnitude and urgency would have garnered some serious airtime in the
presidential debates, but so far not so much.
Certainly, it is a big concern and top priority for millions and
millions of Americans, and not only boomers. Millennials, too, are
worried about what to do with their parents who are now running out of
money. As one friend said to me recently: “You better get along with
your adult offspring, you’re going to end up living with them.”
So presidential candidates, what’s your plan for dealing with the
retirement security crisis?
As you know, we boomers are a little old for hollow reassurance. We
know the debates, heavy on sound bites and entertainment, are not the
best platform to address a subject as complex and serious as
retirement-income security. But you can lay out your priorities.
Oh and one last thing: Puleeeze, don’t talk to us about
cutting Social Security.
For millions of Americans, Social Security is
The Retirement Plan:
65 percent of beneficiaries depend on it for half or more of their
monthly income. Without it, nearly half of women 65 and older would live
in poverty or extreme poverty. Let’s not gloss over what extreme
poverty means. It means living on less than $5,885 per year or $490 a
month.
So when you threaten to cut entitlement programs like Social
Security, what you’re really talking about is dooming millions and
millions of boomer-age women to misery and destitution. Boomer-age women
who vote.
Full Article & Source:
How the Dream of Retirement Is Becoming a Nightmare
