By Al Norman
A recent report from a Washington, D.C. think tank says that the “retirement crisis” facing most families is worse than we think. In fact, the National Institute on Retirement Security (there’s an oxymoron) called their report, “The Retirement Savings Crisis: Is it Worse Than We Think?”
“We have millions of Americans who have nothing saved for retirement,” one of the researchers said. “We have 38 million working-age households who do not have any retirement assets. Of the people between 55 and 64, one-third haven’t saved anything for retirement.”
The article I saw on this study quoted a financial planner as responding that 90 percent of Americans won’t be able to retire on what they get from Social Security and private savings. She said the state of retirement savings in America is “appalling, terrifying,”
Even worse, the experts say that people close to retirement just are not going to be able to catch up. Here’s the advice experts gave to those facing retirement:
•Delay retirement and don’t quit your present job.
•Put as much as you can in your IRA 401(k) contributions
•Don’t try to catch up by investing your savings into more aggressive and risky funds.
•Save more and spend less. Lower your cost of living before you retire, which will also increase your retirement funds.
Maximize your Social Security benefits. But one expert said this was more complicated than just deciding whether or not to retire at 62 or wait. He said there are “81 different strategies” on how to claim Social Security.
•Get out of debt, especially in the last five to 10 years of a working life.
•Stay in the workforce, even part time.
There is absolutely no comfort in these suggestions. The reality is that most families will have to sharply change their lifestyle, because they were not able to get a pension where they worked, the cost of their kids’ education required deep borrowing, and many people have been living over their heads to begin with.
No wonder. We have been trained since childhood to measure our worth by the level of our consumption. Consumer confidence is used to measure the health of our economy. As our manufacturing based began eroding four decades ago, we turned from making things to buying things, and becoming a nation of debtors.
When today’s retirees look at the marketplace, they see employment as baggers and clerks at less than livable wages. The largest employer in America is a retailer that offers workers no pension, and Medicaid as health care.
Government policy-makers saw the three-legged retirement income stool coming apart. As public and private sector labor unions struggled to survive, pensions went out the window. This was not suddenly, but over decades. There were plenty of opportunities to rethink Social Security, to make it take the place of private pensions. But instead, our leaders watched as savings plummeted, and pensions died. We are left with a weak, one-legged stool.
It’s time to view Social Security reform in that context. We need to take the cap off Social Security earnings to put the very rich into the Trust Funds. And we need to tax unearned income as if it were earned income. We need to ask employers to contribute more into Social Security, rather than a 50/50 split with their workers.
Without major reforms — in the short-term — the retirement picture really is “terrifying.”
Al Norman is the executive director of Mass Home Care. He can be reached at 413-772-6289 or at info@masshomecare.org
