Employee Benefits

5,000 new retirees a day will be living off Social Security πŸ€¦πŸ»β€β™‚οΈ

What can fix this? Will financial education make a difference. Is it too late? Frankly I don’t know.

I miss being a Baby Boomer by three years. I am among the relative few born in the middle of WWII, but I cannot comprehend nearing retirement totally unprepared.

We know younger generations are behind in retirement savings and their excuses abound, including the Great Recession, but it’s hard to imaging Boomers with valid excuses for no savings. After all, this generation had the best chance of any to have a pension.

I wonder if these lessons will be learned by Millenials? Not even proposals to enhance Social Security benefits in the future will help this.

Research by the Insured Retirement Institute (IRI) suggests trouble for some retiring Boomers. According to the study, 45% of Baby Boomers have no retirement savings. Only 55% of Baby Boomers have some retirement savings and, of those, 28% have less than $100,000. Thus, approximately half of retirees are, or will be, living off of their Social Security benefits.

Why Baby Boomers Lack Funds 

A key reason Boomers lack funds is the stock market decline of 2008 to 2009. This event scared many older adults out of the markets causing them to miss the subsequent rebound. Panic selling, although understandable, decimated many retirement accounts.Source: Investopedia

7 replies »

  1. “.. it’s hard to imaging Boomers with valid excuses for no savings. …” Dwayne mentioned a couple of situations. You might ask what about low income Americans who live payday to payday? More on that below..

    Simply, we should not concern ourselves about those who made the choice not to accumulate an adequate amount of savings. We don’t need taxpayers to bail out folks who had the means, but decided against accumulating savings. Remember that everyone who retires today (and in the future) has had a more than adequate, tax favored retirement savings option, if only through an individual retirement account, available for each and every one of the last 37 years.

    With respect to Americans of modest means, I recommend you look at Andy Biggs recent writeups about savings and low income wage earners:

    https://www.aei.org/articles/data-show-social-security-expansion-shouldnt-be-presidential-priority/

    https://repository.upenn.edu/prc_papers/537/?utm_source=repository.upenn.edu%2Fprc_papers%2F537&utm_medium=PDF&utm_campaign=PDFCoverPages

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  2. This article also forgets to point out that there are 5000 new retirees everyday who have some kind of savings or pensions. Do I feel bad for ones who didn’t save? Not really. If they were all stay-at- home mothers or had some kind of medical issue, than Social Security is doing exactly what it was supposed to do, keep the elderly from dying in the streets. But how many of those people have no saving because of life choices? Divorces, fancy cars, McMansions, credit card debt? How many did not improve their skills to make more money so that they could save something?

    I do feel for the millenials. Other than working civil service, there is very little chance for a pension or medical in retirement. This means that they have to save up to 3x more just to cover the value of my pension in addition to what I saved. So their current example is us, those who could retire with medical and pensions and did saved some but did things and bought things. The stock market bubbles might have scared them away and there has not been a good place save cash because the interest rates are too low. I try to explain to my young friends what they need to retire but they rather live in the now because they do not believe that they can ever retire.

    I believe that around 2030, we will start to see the results of those who did not save as that will be the retirement age those who did not have the offer of pensions when they started working. Maybe then, young people will see bad examples and decide to do something about it. But with the Democrats promising free everything, I don’t have much hope that they will change their saving habits. Beside Warren wants to tax your wealth, so why have any?

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  3. When I see/read/hear stuff like this, Mr. Quinn, I just cringe. And not for the reasons you might think, nor for the reasons intended by the authors of this sort of thing.

    In short, Social Security is NOT the “sole source of income” for retirement aged individuals. There are actually three sources of income for retirement aged individuals:
    1. Retirement Savings/Investments – ostensibly “missing” or “too little” for some folks,
    2. Social Security, and
    3. Continued Work (the one NOT mentioned in any of these sorts of articles).

    I’m a “Boomer” myself – born in 1954. I learned early (and possibly the “hard way”) to both invest and “pay myself first” in anticipation of retiring. But I did so NOT so I could “stop working” at some arbitrary age, but so that I could be more flexible and discriminating in the work I chose to do in my “retirement” years.

    Currently, I’m 65, I live mostly off of my investment incomes (that started in 1969). I decided to take Social Security at 62, precisely because I didn’t need the income. And I still work! I work because I enjoy it, and my clients evidently want me to – they still pay me. But as I tell some of my “retiring” friends – several of whom didn’t start providing for their retirement early and often – “I work very very hard. I just don’t work very much.” And that pisses some of them off, and I frankly don’t care.

    They had their opportunities to provide for the flexibility of their future just as much as I did. But they made other choices. The fact that I have that flexibility now, and they don’t isn’t much of a concern for me. I’ll continue to work because I enjoy it. They’ll continue to work because they don’t have the flexibility I have. Bummer.

    My bad????

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    • Good plan with a lot of foresight, but you realize you are the exception. You’re lifestyle seems to be out of fashion. The added risk for many is that they may not be able to work even if they planned on it.

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    • “My bad????”
      No, Sean, definitely not ‘your bad’, but rather ‘your good’, ’cause you’re good.

      It’s a pity about your pissed-off friend’s attitudes. Jealousy is never an attractive trait.

      Congrats on your retirement, on having the foresight to start early preparations, to be the fabled tortoise as opposed to the hare (or more apropos, the careful far-seeing ant as opposed to the recklessly profligate grasshopper). Would that more short-sighted Americans follow your example, looking to the future by saving more, spending less, and avoiding going into debilitating debt to finance immediate personal consumption on depreciating (or disappearing) assets.

      One thing puzzles me, though. You stated, “I decided to take Social Security income at 62, precisely because I didn’t need the income. And I still work.”

      So my question is simply this: Since you don’t need the extra SS income benefit, why take it early? Why not wait? Especially considering that by drawing early,

      (1) Income you earn between 62 and your ‘full retirement age’ (FRA) may (depending on the amount and the current SSA earnings limit) reduce your benefit

      (2) The early-claim benefit reduction can knock off 30% of your FRA benefit if you retire as early as possible (the day you turn 62)

      (3) If you waited until age 70, you could get a benefit 24% above your FRA benefit

      Look, I get why it makes perfect sense why some claim early, especially for those poor souls in dire financial straights, or those who are in poor health and don’t expect to live long enough to achieve the financial break-even age (early 80’s or thereabouts) of claiming early vs. claiming late (62 versus 70).

      But since neither of these situations apply to you, why not wait to claim? If you wind up winning the genetic lottery and live to be a centenarian (or, God willing, even beyond), why not minimize your long-tail odds of outliving your investments, by maximizing the lifetime-guaranteed SSA government annuity?

      Sorry, Sean, I don’t mean to come across as nosy, obviously your decisions are yours alone, for whatever reasons you deem fit. It’s just that I’m not too far behind you (born in ’61, putting me on the Boomer/GenX cusp), and let’s just say I’ve got a very personal stake in gathering as much info as I can to try and make well-informed decisions regarding retirement! (I sure wish that I’d started saving more earlier – too soon old, too late smart).

      Being extremely risk-averse by nature (and by nurture alike), I guess my innards are just naturally hard-wired to view SS as it was originally marketed – as old age and disability insurance, rather than as a retirement pension, though for far too many folks, that’s exactly what it’s morphed into.c

      Again, congrats on your retirement!

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      • Hi Big Bob Baldy!

        Thanks for the kudos. On your question about why I elected to take SS early, it really does in fact boil down to my not “needing” it, and trying to make certain I never “needed” it – and to some lesser degree, the flexibility I mentioned.

        As you (and Mr. Quinn and others) pointed out, “waiting” to collect SS does indeed increase the monthly amount I can collect – which, again, I don’t “need” now and don’t expect to “need” anytime in the future, pretty much irrespective of how long I live. And I agree with you, Mr. Quinn and other that “waiting” to collect SS is the prudent path for some or even most.

        I just learned very early in life that SS was NOT something to rely heavily on for retirement. And certainly not for a “sole source of income”. It was never intended to be a “sole source of income” for retirees or the disabled, even from its inception. It’s there, so I take it. But if it disappeared, I’d still have quite a bit of flexibility.

        And on the “flexibility” dimension, taking the lesser SS now allows me a good bit greater flexibility in how I structure both my IRA investments, and my ordinary investments, as well as how much I work. In short, I can invest a bit more/longer in growth/value types, and hold off on relying heavily on income type investments that tend not to grow. As it happens, tapping SS now precludes me from having to tap my IRA’s now. They can continue to grow (tax deferred), and I’m actually doing “better” than the 8% per year growth rate of SS.

        That can change at any time, and I fully understand that. Believe me. I’ve (financially) survived quite a few recessions, financial market downturns, and even quite a few self-inflicted sub-optimal investment decisions in my time. But I’ve always found it to be more prudent to invest in and depend on the U.S. Economy than the U.S. Government for warranting my future!
        Warren Buffet seems to agree.

        In your case, I’d just say It’s Never Too Late to Start – or Continue! Owing to circumstances well beyond my control or influence, I was financially and professionally “zeroed out” just before I turned 40 and had to start all over. Not fun. And, I’m very risk-averse myself. I’m not particularly wealthy, and never have been. Wealth was never a big “goal” of mine. Flexibility in “retirement” was.

        Two things more: 1. no need to congratulate me on retirement, because I’m not retired (just older), and 2. the name is Shayne.

        Be well.

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      • Hi Mr. Quinn.

        Sorry, but I have to “push back” a bit on your comment here.

        First, my lifestyle was pretty much always “out of fashion” by some standards – until now. Now it seems, my “lifestyle” is all the rage and something for some to be jealous of.

        Perhaps us senior types should be doing what OUR senior types were doing for us, back in the day – harping harder on the millennials, et. al., to provide for their OWN futures, rather than depending on Government to provide. I’m more than willing to do my part in that, and to that end. What I’m NOT willing to do is lobby to enhance/expand Government (Taxpayer) involvement!*

        And as for “not being able to work…”, I’m not buying that excuse either. Certainly not for the “many” as you put it. I’ve held a variety of “jobs” in my time – some quite lucrative and even “glamorous” by some standards. But I’ve held more jobs, and for a greater overall length of time, which were neither particularly lucrative nor “glamorous”. Point being, you do what you need to do to get the bills paid – YOURSELF! And I suspect you would agree with that, at least in principle.

        I can joke now about “not working much” or “often”, solely because I worked CONTINUOUSLY up until a couple of years ago.

        *ONE Exception: Back in 2010, bundled into the $900 Billion “Fiscal Stimulus” package, ostensibly to fund those “shovel-ready infrastructure projects” that never actually received ANY of the $900 Billion, was an individual “tax break” I didn’t even know about until April 2011. It consisted of an exemption of both Long Term Capital Gains AND Qualified Dividend income from Federal taxation, for the first two (lowest) tax brackets. That saved me some tax dough. Pleasant surprise. But I never expected it to last. Turned out though, that in the 2013 Federal legislation, that break was retained and still exists.

        If you’d like me to help lobby the Federal Government for something to help millennials, et.al., to provide for their retirements, I’d be glad to argue for expanding that tax break to at least the first 3 tax brackets. And I already am lobbying for that – every chance I get. (Including this one.)

        As I indicated below to Big Bald Bobby, I’d much rather see millennials, et.al., incentivized to invest in the U.S. Economy rather than being compelled to further “invest” in the U.S. Government!
        And as an official “old guy” now, I even consider it my duty.

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