The Retirement Crisis in America
I am pleased to share an article published by Ms. Juliana Kaplan in Business Insider to report the problem of retirement crisis in America.
There is a problem with employer provided 401(k) retirement accounts. These investments are not secure for they are not insured. The risk of loss is more certain than the chance to get some secure income in old age. The employer chooses the investor who charges the administrative fees irrespective of gain or loss in the invested funds. I struggled for over twenty five years with such accounts and was forced to close the account and paid penalty for premature closure. I used the funds to pay off credit card debt. At age 75, I am still working a full time hourly wage job and reopened the 401(k) account in Jan 2024 to reduce the federal tax. There is no law to compel the employer to provide any matching contributions to the employee retirement fund. In my experience, the employer’s matching contribution doesn’t even pay the costs of the administrative fees.
I like to recommend the concept of Provident Fund offered to employees of state and federal government in countries like India. The Provident Fund is in addition to the retirement pension which is unlike the Social Security Old Age Monthly Retirement Benefit. The pension plan is operated by the State or Federal Employer for their own employees and not the general public.
When speaking about economic security and defending the dignity of people during old age, I wish to add the concept of Human Rights. It is about the attainment of complete Human Rights during old age. The concept of Human Rights and Human Dignity may help people to seek the Right to Life during their old age when they may lose the physical ability to work.
The term ‘American’ is used as if aging is the peculiar problem of a particular nationality or the citizenship status of people. In my analysis, there are numerous human beings who currently reside in the United States who pay all taxes like the American citizens but are denied access to the Social Security Old Age Monthly Retirement Benefit as they are identified as unqualified aliens by the Social Security Act that was amended by President Clinton’s Welfare Reform Act (PRWORA) of 1996. From a human perspective of old age, economic security impacts the lives of all people without any concern for their nationality, country of origin, or citizenship status.
Just over half of Americans over the age of 65 are earning under $30,000 a year, and it shows how stark the retirement crisis is
Juliana Kaplan
Mar 4, 2024, 10:45 AM EST
- A new report from Sen. Bernie Sanders signals a looming retirement crisis for Americans.
- Many older folks are financially vulnerable, with over half living on incomes of $30,000 or less a year.
- Solutions might include enhancing Social Security checks and setting up automatic retirement accounts.
There’s a retirement crisis looming for many Americans — and some are already living on scant incomes. Retirement is becoming a luxury for Americans hoping to get a reprieve in their later years, and it’s something a handful of lawmakers are hoping to change.
A new report from Sen. Bernie Sanders, the chair of the Senate Health, Education, Labor, and Pensions Committee, looks at the bleak future facing some older Americans and those who hope to retire someday.
The report cited the National Retirement Risk Index, which found that about half of households “will not be able to maintain their” preretirement living standard and that 56% of low-income households — and 45% of those who are middle income — were “at risk” of not maintaining those preretirement standards at age 65.
Even more glaringly, 73% of those in the bottom group of wealth holders were similarly at risk, compared with 28% of people in the highest wealth group.
“After a lifetime of hard work, Americans deserve to retire with dignity,” Sanders’ report said. “But with our retirement system focused on increasing profits for Wall Street, a financially secure retirement is beyond the grasp of many workers. The time to change that is now.”
Americans’ struggle to comfortably retire could prove costly and devastating for retirees who may find themselves cash-strapped and unable to healthcare or housing in their later years. A 2023 Pew Charitable Trusts study suggests that as more households with older Americans become financially vulnerable from 2021 to 2040, state governments will take a $1.3 trillion hit.
And for some, the retirement crisis is already here. Just over half of Americans older than 65 are living on incomes of $30,000 or less a year, according to the Census Bureau’s Current Population Survey. The largest share — just under 23% — has incomes between $10,000 and $19,999.
How much income Americans 65 and older have
$1-9,999: 10.3%
$10,000-19,999: 22.8%
$20,000-29,999: 17.3%
$30,000-39,999: 11.9%
$40,000-49,999: 8.2%
$50,000-59,999: 6.8%
$60,000-69,999: 5.00%
$70,000-79,999: 3.5%
$80,000-89,999: 2.6%
$90,000-99,999: 2.0%
$100,000 and over: 9.6%
Chart: Juliana Kaplan/Business Insider Source: Census Bureau Current Population Survey for 2022
Many Americans hoping to age out of work may also not have retirement accounts to fall back on, or to use as a cushion. In the Federal Reserve’s Survey of Consumer Finances, just 42% of Americans 75 and older reported holding retirement accounts as of 2022. Similarly, only 51% of Americans 65 to 74 said they held retirement accounts.
Retirement accounts by age
And, as Sanders’ report said, about 10% of older Americans live in poverty, an analysis from the Center on Budget and Policy Priorities found. Without Social Security income, about 38% of Americans 65 and older would be living below the poverty line. Even so, America’s Social Security benefits lag programs of many other wealthy countries; benefits amount to, on average, 51.8% of workers’ earnings across the Organization for Economic Co-operation and Development member countries. In the US, they fall under 40%.
Among G7 countries — a group of wealthy, industrialized democracies — the US trails Japan only slightly when it comes to elder poverty rates, defined by the OECD as making less than half a country’s median income.
Old age income poverty rate below 50% of median income among G7 countries
Japan: 15.7%
United States: 15.1%
Italy: 13.5%
United Kingdom: 11.2%
Germany: 10.9%
Canada: 8.6%
France: 8.4%
Chart: Juliana Kaplan/Business Insider Source: OECD Data Explorer
Some lawmakers, including Sanders, have proposed legislative solutions, such as beefing up Social Security checks, setting up kids with automatic savings accounts, or automatically setting up retirement accounts for lower- and middle-income Americans whose workplaces might not offer them.
All that comes as older Americans see their adult children leaning on them financially and Gen Zers and millennials weather their own economic storms.
“I’m really expecting the landscape of the economy for this generation that my children are in to be dismal,” Jane, a boomer who unretired to help support her Gen Z kids, previously told BusinessInsider.
Are you struggling to retire or worried you’ll never be able to retire? Contact this reporter at jkaplan@businessinsider.com.
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