Study Finds Trouble Ahead for Today’s Retirees
Research Finds Trouble Ahead for Today’s Retirees
New research has found that a vast number of American retirees will be financially worse off than their parents—ending an era of high living standards for the nation’s retirees which began after shortly after World War II.
According to Boston College’s Center for Retirement Research, the recession and weak recovery have damaged the retirement picture for large numbers of Americans, the full extent of which is now being grasped by the public. The 2008 Wall Street meltdown destroyed close to 50 percent of American’s personal wealth—while at the same time creating a long period of high unemployment where savings accounts pay almost zero interest. Though the stock market is approaching record highs, most of those gains having only benefited the well-off retired Americans.
The decline in retirement prospects marks an historic shift in a country that at one time witnessed generations of improvement in the lives of retirees. Lower retirement standards will have far-reaching implications as increasing number of retirees are forced to live with younger relatives, or turn to social service programs for support. Fifty three percent of America’s workers 30 years of age and older are on a retirement path that will leave them unable to cope with their golden years. That’s a sharp drop since 2001, when 38 percent of Americans were at risk of declining living standards in old age. In 1989, it was 30 percent who faced that risk—and that number is even high, according to the research.
In the 21st century there has appeared a real mismatch has appeared between retirement needs and retirement benefits. Problems for future retirees seem to be closing in from all sides. Half of American workers have no retirement plans through their jobs, leaving people on their own to save for old age. In fact, four out of five private-sector workers with retirement plans at work have only 401(k)-type defined contribution accounts, instead of the traditional pensions that, in the past, paid retirees for life. Workers with defined contribution accounts often put too little money aside, make a lot of withdrawals, or just use bad investment strategies. Those aged 55 to 64 years of age have median retirement account balances of around $125,000, far short of what they will need.
Retirement savings shortfalls and recent policy changes aimed at helping retirement prospects have only contributed to the growing inequality between those well-prepared and those who are not prepared for retirement. The hits to people’s retirement incomes are happening just when Americans are recording longer life spans and healthcare costs are spiraling out of control. Retirees will also be paying more for their Medicare premiums, which are deducted from the Social Security checks, going from 12 percent right now to 15 percent by 2030.
Finally, the option many retirees are taking is just working longer and putting off retirement.
“If everything had at least stayed status quo from 2002 until 2012, retirees might be doing what they want to do today,” said retirement expert Bill Losey “But, as it stands, most are nowhere near ready to retire.”
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