by
Kate Randall
Americans
are reaching retirement age in worse financial shape than the prior
generation for the first time since the 1950s. According to an
analysis published Saturday by the Wall Street Journal, those who
should be entering their “golden years” have seen their median
incomes stagnate and even decrease, reversing the pattern that had
prevailed since the post-World War II Truman administration.
Those
approaching retirement have dwindling resources, in many cases
because they have had to pay off their children’s college loans or
take from savings to care for aging parents. Social Security and
retirement fund receipts have not risen in years, and 401(k)
retirement funds will bring in a median income of less than $8,000 a
year for a household of two.
The
reality is that instead of retiring, many older Americans will be
forced to remain in their jobs after age 70 or take jobs for which
they are overqualified to supplement their meager retirement income
and savings. These older workers will find themselves in competition
with younger workers for low-wage, temporary and part-time
employment.
The
desperate situation facing millions of workers contemplating
retirement stands in sharp contrast to the accumulating wealth of a
narrow financial elite, with the world’s 18.1 million individuals
with $1 million or more in investable assets shooting up by 10.6
percent last year.
A 2018
retirement savings survey by GOBankingRates compiled data from three
Google Consumer Surveys by age group—millennials, Generation Xers
and baby boomers—asking the same question: “By your best
estimate, how much money do you have saved for retirement?”
The poll
found that 42 percent of Americans have less than $10,000 in savings
and that 14 percent have absolutely nothing saved for retirement.
According to the Bureau of Labor Statistics, adults 65 and older
spend about $46,000 a year on living expenses. In other words, more
than four in 10 Americans do not have saved what it would cost to
live for a year if they were to retire today.
Not
surprisingly, the situation facing millennials—ages 18-34—is even
bleaker. Fifty-seven percent have $10,000 or less saved for
retirement, and 18 percent have zero saved.
Backing
up this survey, the Wall Street Journal found that more than 40
percent of households headed by people aged 55 through 70 lack
sufficient resources to maintain their living standards in
retirement. That is around 15 million US households.
The
decline in living standards of older and retired workers follows
decades of progress in the financial security of America’s aging
population. In the postwar era, fixed government and company pensions
gave millions of people a guaranteed income on top of Social Security
payments. The majority of Americans retired in better shape than
their parents.
The
prospect of people living a more comfortable retirement than their
parents is now evaporating across all generations. The Journal points
to the following indices:
• Median
personal income of 55- to 69-year-olds leveled off after 2000 for the
first time since data become available in 1950, according to an
analysis of US Census data by the Urban Institute.
• Households
with 401(k) investments and at least one worker aged 55-64 had a
median $135,000 in tax advantaged retirement accounts as of 2016,
according to the Boston College Center for Retirement Research. This
would amount to just $600 a month in annuity income for life.
• Americans
aged 60-69 had about $2 trillion in debt in 2017, an 11 percent
increase per capita over 2014, according to New York Federal Reserve
data adjusted for inflation. Their debt for their children’s
student loans in 2017 was more than six times the level in 2004.
Healthcare
costs are a major contributor to increasing poverty among American
seniors. According to the Kaiser Family Foundation, since 1999
average worker contributions toward individual health insurance
premiums have risen by a staggering 281 percent, to $1,213 annually.
A survey last year by the Employee Benefit Research Institute found
that more than a quarter of workers cut back on retirement savings
due to medical costs, and nearly half reduced other savings.
Only a
quarter of large companies offer retiree medical insurance, down from
40 percent in 1999, according to Kaiser. Premiums for Medicare, the
government health insurance program for the elderly, and costs that
the program doesn’t cover accounted for 41 percent of the average
$1,115 monthly Social Security benefit in 2013, leaving the average
retiree with just $658 a month.
One of
the biggest factors leading to less secure retirement is the shift
from pensions to 401(k)-type plans. Following passage of Social
Security legislation in 1935, pensions gained momentum after World
War II. According to the Employee Benefit Research Institute, by the
1980s, 46 percent of private-sector workers were in pension plans, a
situation that is alien to most workers today.
The
Journal analysis points to congressional action in 1978 that “set
the stage for a pension retreat.” Congress authorized companies to
obtain tax-deferred treatment of executives’ bonuses and
stock-options—essentially tax breaks—to supplement their pension
payouts. This move ushered in the era of the 401(k), allowing
employees to reduce their taxable income by placing pretax dollars in
an account. Employers seized on this to dump pension benefits and
move toward 401(k)s.
With the
financial collapse of 2008, workers with 401(k)s saw the value of
these accounts plunge. They were forced to withdraw funds to pay
bills or cut back on their contributions. The vast majority of these
retirement accounts have never rebounded.
Financial
“experts” on television and in blogs admonish young adults and
baby boomers to be responsible and frugal and save for their
retirement. These generally wealthy financial advisers are miles away
from the overwhelming majority of Americans of all ages, who struggle
on a daily basis to pay for basic necessities such as food, housing,
transportation and healthcare.
A
separate GOBankingRates survey asked more than 1,000 adults with $0
saved, “Which is the main reason you do not have any retirement
savings?” The most common response was, “I don’t make
enough money,” with about 40 percent choosing this response.
The second most common reason for not saving was, “I’m
struggling to pay bills,” with about 25 percent of respondents
choosing this answer.
These
studies point to the growing scourge of income inequality, which is
inevitably propelling working people into struggle against the
financial oligarchy that dominates US economic and political life and
maintains its rule through its control of both big-business parties.
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