Retirement

Who is going to bailout a generation unprepared for retirement?

Most of the rest are un­pre­pared. Fifty-four per­cent of house­holds with middle in­comes—rang­ing from around $48,000 to $95,000 a year—don’t have enough saved to main­tain their qual­ity of liv­ing in re­tirement, according to the Bos­ton Col­lege Cen­ter for Re­tire­ment Re­search. Some of those who saved were hit by un­fore­seen health-care costs. Oth­ers took on debt for ed­u­cation. Yet more made in­vest­ment mis­takes or lost their savings in the 2008 fi­nan­cial cri­sis. WSJ October 5, 2018

All of the above is true, of course, but there is no need for it to be so. Nowhere near 54% of households had unmanageable health-care costs, especially beyond those covered by insurance. Debt for education is a questionable investment, but it is what it is.

When it comes to investment mistakes, a bit of education and attention to the matter would have avoided that problem. As far a lost savings after 2008, there is simply no excuse; again education.

But here we are, millions of people on the road to retirement who will need a bailout of one kind or another. There are already calls for increasing Social Security benefits, but if that occurs, it won’t mean much even if benefits are increased by 10% or so which would require significant tax increases. For example, the average monthly Social Security benefit granted in 2017 was $1,413.08. How significant is an increase of $141?

Nope, increasing Social Security won’t do it. So, who is going to bail out the generation not prepared to retire … or will they just never retire?

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1 reply »

  1. You’re missing the point. Poverty has dramatically declined among older Americans – compared to the generation of Baby Boomer grandparents. Baby Boomers, their children and grandchildren are amassing assets that some predict will be $80+T by 2050 (assuming Congress doesn’t scuttle individual account retirement savings plans before then). And, yes, Congress will have to take action in the next 15 or so years – as they did in 1983 – once the Social Security and Medicare trust funds are exhausted. I think most agree that taxes will go up – can’t see them reducing seniors benefits. Not saying that is the right solution, only the one we should all expect if they continue to wait until the trust funds run out of assets.

    Yes, despite all of the entitlement programs, we will still have some poor older Americans.

    However, as you state, in the 12-month period ending June 2017, over 2.9 million Americans signed up for Social Security benefits and were awarded an average of $1,413.08 in monthly benefits, $16,957 per year. While average ≠ median, it does mean that many will have an income from Social Security alone that far exceeds the federal poverty level – $12,060 in 2017.

    An older American living solely on Social Security benefits will often be a “dual eligible” – Medicare and Medicaid, where they have little if not no Medicare Part A, Part B and Part D premium payments and little or no out of pocket medical expenses – removing one of the largest expenses in retirement. Many also qualify for subsidized housing/living and other entitlements.

    It is not the retirement many aspire to, but, those who aspire to something different have plenty of opportunity to prepare. For others, for those who do not have retirement preparation as a priority, we have already put an “entitlement” bailout in place. It is here, today, and of course it applies to many of today’s retirees with minimal/no savings, or those who have gone through spend down.

    In fact, one estimate has older American poverty at less than 5%.

    No new bailouts needed – no matter how much Bernie and other D’s whimper..

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