Retirement is the final chapter of the American
dream. But the dream of the golden years is quickly
turning into a fairy tale.
Retiring in America today is not easy.
It is a very tall mountain to climb.
More than a third of Americans today feel
unprepared or unsure if they're on track for
retirement. And nearly a third of seniors say they
either plan to work through the age of 70 or never
retire in their lives.
I'm not want to be rich.
I just like to have enough to where I could be
comfortable.
The pandemic, a war in Europe, rate hikes, as well
as fears of a recession, have also led to great
turmoil in the market, wiping out an estimated $3.4
trillion from retirement accounts during the first
half of 2022.
The United States is definitely facing a
retirement crisis.
If we don't do anything about it, years down the
line, you're going to wind up with a lot more seniors
in poverty, reliance on public services.
Others say the retirement crisis in America is a myth.
The US retirement system is stronger than it's ever
been. Retirement incomes have never been higher.
Retirement savings have never been higher.
Participation in retirement plans has never been higher.
All the things we would like our retirement system
to be doing it is doing.
So is America facing a retirement crisis?
And if so, can it be stopped?
My name is Juanita Dykes.
I live in Rural Retreat, Virginia.
I've been retired for six years now.
I've had a number of jobs.
I've worked in factories all my life.
Unfortunately, I didn't listen to people telling me
that I needed to save for retirement.
I thought I would get paid by the government.
You'll have enough to live on.
Wrong, you don't.
I get $1,574 from Social Security.
I get $631 from my pension.
You pay all your bills, car payment, all your utilities,
all your insurance, all that together.
It just don't add up.
Americans aren't saving enough for retirement.
I don't have no savings.
I'm probably in the red at the bank for you.
You write a check and you don't have nothing to cover
it. Then when you get your next check, all that extra
money comes out.
The median retirement account balance for those
approaching retirement sat at $89,716 in 2022.
That translates to less than $500 per month over a
15-year retirement span.
Baby boomers, they were well into their mid-forties
before 401(k)s came along and they had the opportunity
to saved When they entered the workforce, the
assumption was social security and traditional
pensions. Now that they're reaching retirement, the
ground rules have changed and the expectations are
that they would have saved more along the way.
The last place I worked was just like a factory job.
And you got paid, that's it.
No extra nothing or nothing.
We didn't have paid holidays. You didn't have
vacation.
You didn't have nothing. You just worked.
The other problem is that during times of economic
crisis, there's a lot of leakage out of retirement
savings plans.
Whereas things like pensions and social security, they
are lockbox. You don't touch that money no matter
what. That is there for your future.
IRAs and 401(k)s often tend to get tapped when people
run into unemployment or health issues, medical
expenses.
In our own research of retirees, we see that
they're doing pretty well.
However, they're not financially in a position to
absorb a major financial shock.
And a big example of that is the high cost of
long-term care services and support.
If they have some sort of cataclysmic health crisis or
need that long-term care, they just don't have the
financial resources to be able to afford it.
One in five Americans, aged 65 and older, said they
spent more than $2,000 out of pocket on health care.
A separate study found that more than a third of
Americans over 65 are worried they're unable to
afford health care services within the next 12 months.
If you go to a regular doctor, that's covered.
But if you go to a specialist, that's like $30.
I have an appointment this week with a specialist.
I don't have the money to go, so I'll have to call and
cancel that and redo it some other time.
Higher life expectancy also means that more retirees can
outlive their retirement savings.
An analysis by the World Economic Forum found that
men live 8.3 years longer than their retirement funds
can pay for, while women live 10.9 years longer.
Younger generations aren't faring any better.
About 25% of non-retired adults in America have no
retirement savings whatsoever.
A lot of people don't have access or at least don't
have consistent access to an employer-sponsored
retirement plan. And we know from the behavioral science
research that people don't walk into a bank and say, I
want to open up an IRA.
Workers aged 25 to 34 had an average total saving rate of
10.5%, while workers under 25 had a saving rate of 8%,
far from the recommended total saving rate of 15%.
And as we look at the changing landscape,
especially millennials and Gen Z, they're entering the
workforce with student loans, with a debt that is
unprecedented from earlier generations.
Another issue impacting younger generations is
they're going to change jobs many times over the
course of their careers, as well as spend time in
self-employment. So they're going to have to take a much
more hands-on do-it-yourself approach in
managing their savings and investments and ensuring
that they're saving enough to last their lifetime when
they retire.
I have considered going back to work, but I had a knee
replacement two years ago and the other one's trying
to tell me it's about time for it, so I can't stand
very long at a time.
I won't say that I won't have to because I might if
they don't get this social security straightened out
where we can have enough to live on.
In 2022, the Social Security Administration estimated
that their reserve will deplete by 2034 unless
Congress intervenes, putting Social Security
benefits under threat.
Because of demographic changes during the 70s and
80s, social security built up a large surplus and is
now in the process of depleting that surplus.
Once depleted, retirees will only receive 78% of their
benefits starting then.
It's not obviously the end of the world, and it doesn't
mean social security is bankrupt at all, but it does
mean a meaningful reduction in benefits that's really
going to hurt people, especially at the bottom and
even in the middle.
Inflation has been the most disruptive force to
retirement. A quarter of Americans are expected to
delay their retirement due to rising consumer costs.
The worker is now the one that bears the longevity
risk and the market risk in retirement.
Market downturns are really the most problematic for
people who are about to retire because that
represents a real loss to them as opposed to something
that they can recover from over time.
$1,000,000 in a retirement account two years ago is
worth about $120,000 less today when adjusted for
inflation.
If you're retired and on a fixed income, inflation
really, really, really hurts. And we've come out of
decades of historically low inflation to all of a sudden
pretty substantial inflation, especially in the
things that matter to people, which is food and
fuel.
I'm like anybody else.
I like a good steak every now and then.
Well, that's just plumb out of the question because you
can't afford to buy that.
You just have to buy what you merely have to have and
then hope that you have enough left to pay your
bills.
Inflation is higher than we've seen in a long time.
Right now, we don't really know whether this is we're
now in an era of high inflation or higher
inflation or whether it is a longer tail from the
effects of the pandemic.
An ongoing retirement crisis reduces consumption and
drains resources which could be detrimental to the
economy as a whole.
In terms of people who wind up falling into economic
hardship during retirement, that is
something that a lot of states have taken very, very
seriously, and they're really concerned about more
and more seniors needing things like food stamps,
subsidized housing, which is already in very low
supply, and also Medicaid.
A hidden impact that doesn't get as much discussion is
the impact on families.
When an aging parent doesn't have the resources
to care for themselves, or maybe they can't afford
long-term care, they turn to their adult children.
As adult children step in to support them, this detracts
from their own ability to save for retirement.
So this could create a generational, vicious cycle
unless we solve for it.
But some argue that the retirement crisis in America
is merely a myth.
The US retirement system is strong.
The income of the median retiree, the typical retiree
in the United States is at record levels.
It's never been higher.
Poverty and old age has never been lower.
The median US retiree has the highest disposable
income in the world, according to the OECD, 40%
higher than Germany, 50% higher than the Netherlands.
U.S. retirees in surveys are much more likely than
European retirees to say they can maintain their
pre-retirement standard of living.
So all the things we want people to do are going in
the right direction.
In 2021, nearly eight in ten retirees were confident
they'll have enough money to live comfortably
throughout retirement, while over seven in ten
workers agreed with the sentiment.
Nobody really has the incentive to tell the truth
about the successes of the US retirement system.
Four in five retirees also reported that their overall
lifestyle after retirement was as expected or better.
I think everyone agrees there are certain people who
are falling behind in their retirement savings.
That's true today. It was true in the past.
And the question is, what do we do about it?
The danger of claiming we have a retirement crisis is
we throw the baby out with the bathwater.
We throw out the things that are working for us and
we don't address the problems that really exist.
I think a lot of it is semantics almost.
Most researchers do understand that there is a
substantial portion of the population that are going to
be financially insecure in retirement.
There are some debate about whether that's, you know,
high 30%, 50%, 60%, but that's not a small portion
of the population.
Policy will likely play a pivotal role in improving
the state of retirement in America.
Retirement policy is one of the few things in this
country that has a long and exemplary history of
collaboration among both parties.
What we need from a public policy perspective is a
broader collaboration among industry, among
employers,the great minds, academics, nonprofits and
everyday people to step back and take an even
broader look at our retirement system and
address the issues that are the greatest detractors of
retirement security right now.
The Securing a Strong Retirement Act of 2022 was
passed by the House in response to concerns over
retirement security.
The act includes many benefits that could help
more Americans save for retirement, such as
automatically enrolling employees into a retirement
plan unless they elect not to participate.
But issues concerning coverage still need more
attention. Almost half of the employees in the private
sector between the age of 18 and 64 aren't provided
with options to save for retirement, and about 65% of
employees in companies with 10 to 24 employees lack
retirement plans.
Improving retirement plan coverage, meaning ensuring
that all workers have the ability to save for
retirement in the workplace is paramount to increasing
retirement security in the U.S.
We need to have a retirement system that is
fully inclusive so that people have the opportunity
to save, invest and grow their savings over their
lifetime.
Ultimately, retirement security today rests in the
hands of future retirees.
Tip number one, avoid getting overwhelmed.
Getting overwhelmed can lead to procrastination, and
it can lead to inaction, which is counterproductive.
Another is create a retirement strategy.
Even have some fun with it.
Envision what you would like your life to be like in
the near future, or if you're younger, far away
into the future, and then put some numbers by it.
Start building a plan.
Seek help if you need it.
There are financial professionals available to
help you with that.
You have to engage.
You have to learn as much as possible.
So it's up to you to know enough to ask good questions
and make informed decisions. It's your
retirement.
You need to save.
I know when you're young, you think, I don't need to
save, I'll do that next time, we'll do this whenever
. Do it now because I'm telling you, you need to.
If you plan on living any length of time, you need the
extra money.