A slew of articles and videos summarize numerous surveys that all show the same results: the majority of Americans are not on track for their retirement goals. Simply perform a Google search of the title of this article to find all kinds of frightening statistics.
The chart above is from a Retirement Security report from the U.S. Government Accountability office. As quoted in the report, “In surveys, compared to current retirees, workers age 55 and older expect to retire later and a higher percentage plan to work during retirement. However, one survey found that about half of retirees said they retired earlier than planned due to health problems, changes at their workplace, or other factors, suggesting that many workers may be overestimating their future retirement income and savings. Among those with some retirement savings, the median amount of those savings is about $104,000 for households age 55-64 and $148,000 for households age 65-74, equivalent to an inflation-protected annuity of $310 and $649 per month, respectively. Social Security provides most of the income for about half of households age 65 and older.”
This crisis does not differentiate among race, profession, or even income level. The middle and upper classes are feeling the day-to-day squeeze, as detailed in The Secret Shame of Middle-Class Americans. As quoted, “Nearly half of Americans would have trouble finding $400 to pay for an emergency…. living very close to the financial edge…. [for some] to struggle financially is a source of shame.”
Assuming that Americans continue with the same retirement savings rate, what do the public and social implications look like? As financial planners, we often look toward the future and have generated some forecasts of what we may see:
- More Americans may fall into the sandwich generation
Millions of Americans already fall into the category of “sandwich generation”, defined as “a generation of people responsible for bringing up their own children while also caring for their aging parents”. The need to combine households, both physically and financially, will likely continue to grow as the Baby Boomers enter retirement. When one generation is supporting the financial needs of two other generations, this puts a strain on income and hinders their own retirement savings, which perpetuates a negative cycle. Combining physical and/or financial households may either strengthen family bonds or possibly strain the family dynamic. This leads us to creative household planning, possibly between families or peers in the “Golden Girls” style.
- Pressure on public health systems
Lack of sufficient income in retirement may find retirees who are not able to afford the cost of basic health needs, let alone costs for a specialist. In turn, this puts pressure on cities and states to adopt or expand financial assistance programs (such as Medicaid) to keep Americans safe from the spread of infectious diseases.
- Protect seniors in the workplace
As aging Americans are finding it financially necessary to continue working into their seventies and eighties, there will likely become an increasing battle of generations in the workforce. Although there is already legislation in place to protect against “ageism” discrimination in the workplace, an expansion may be needed as the tension builds over time. However, aging workers may also find themselves battling between a health crisis that hinders their ability to work with the financial need to continue working. This then increases the need for stronger laws to protect seniors in the workplace for an extended period of time, which could possibly hinder younger generations from expanding their careers.
- Demand for taxpayer-provided retirement benefits
Retirement savings reforms are part of law-making discussions, but we have not yet seen action. The longer retirement savings reforms are delayed, the more likely that Congress will face demands for additional taxpayer-provided retirement benefits in the future. Political affiliation aside, this crisis affects all Americans.
If you would like an objective opinion on saving for your own retirement, call Sharkey, Howes, and Javer at 303-639-5100 to schedule a complimentary meeting.