4 ms·

40% of the American middle class face poverty in retirement, study concludes

66 points by foolrush 8y ago

vfulco2 8y ago
Prices for everything will need to come down and people will learn not to consume for its own sake. Return to normalcy
cameldrv 8y ago
What is "at risk"? A married couple is going to be getting over $4000/mo in Social Security, mostly tax free. Outside of a few metros, it's hard to see how that leaves one impoverished. The Baby Boomers are the whiniest generation ever.
- toomuchtodo 8y ago
  Can you provide a citation? The data doesn't agree with your assertion. "Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65, according to the study. The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household."
  - laser 8y ago
    Twice the poverty level sounds pretty comfortable to me. Living on 75% of that in LA right now. The "Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household." sounds like real poverty, though.
    - deleted 8y ago
      [deleted]
    - toomuchtodo 8y ago
      > Twice the poverty level sounds pretty comfortable to me. Living on 75% of that in LA right now. Which is substantially easier in your 20s and 30s than in your 50s and 60s.
      - laser 8y ago
        Yeh that's fair, but will more tax create more easiness for people?
        deleted 8y ago
        [deleted]
      - chrisseaton 8y ago
        > Which is substantially easier in your 20s and 30s than in your 50s and 60s. Huh? In your 20s and 30s you’re paying to build your pension, paying for your mortgage, paying for your kids, paying for your student debts. In your 50s and 60s you’re paying for none of that. What are you paying for at all?
        Qworg 8y ago
        Healthcare.
        dragonwriter 8y ago
        Except for “student debts” (which isn't all that uncommon, either) it's common for people to be paying for all those things in their 50s and 60s (adult children very often get support from their parents), and it's also quite common for people these days not to have started paying for any of then except retirement (usually not pension, except insofar as social security is a pension) building through their 30s. It's pretty likely you aren't doing much retirement savings or paying for a mortgage on an income below double the poverty level at any age.
- igravious 8y ago
  "The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household." You say $4000/mo for a couple = $48,000/yr – article says $15,730/yr for the worst off and $31,260/yr for the next worse off. Do you have a source for your figure?
  - cheschire 8y ago
    This [0] article provides a table of numbers. There are several ways to approach $4000 for a couple, but I feel like those numbers only apply to the top 10% incomes in America. Hardly a good average. 0: https://www.fool.com/retirement/2018/08/21/heres-how-much-social-security-benefits-are-by-age.aspx https://www.fool.com/retirement/2018/08/21/heres-how-much-so...
  - masonic 8y ago
    62 is early retirement. Of course one gets lower returns if one retires early.
refurb 8y ago
Warning: anecdote incoming! I’m not sure being under the federal poverty line (or 2x cutoff as this article used) means the same thing at retirement age. My mother, for example, has a monthly post-tax income of $1,400 or just under $17,000 per year. She must be poor right? However, she owns her home outright. So her total reoccurring monthly expenses are around $1,200. That includes property tax, condo fees, health insurance premium, food and gas for the car. She has a very comfortable life. She would certainly not call herself poor. She can basically live off her pension without touching the equity in her home or the savings she has (unless it’s for something important like travel). A lot of people in retirement are no longer relying on income, instead they are taking money out of savings as well. Not sure if this paper accounted for that.
- murukesh_s 8y ago
  Post-tax income of $1,400. Is it pension? is the pension taxed?
- deleted 8y ago
  [deleted]
- deleted 8y ago
  [deleted]
- paulgrant999 8y ago
  now picture tomorrow her condo floods and the car gets t-boned. Whats that do to her budget?
  - WhiteSource1 8y ago
    That's what insurance is for.
    - paulgrant999 8y ago
      You didn't mention it in your budget; presumably therefore, she has none. You did mention health insurance, however.
laser 8y ago
Wait, this is sensationalized. Within the article the quote is "Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65..." And their definition of near poverty is twice the poverty level? If I can live comfortably on less than 75% of that in LA, I don't see how that could be considered poverty. The 2.6 million, which I assume implies 12% of middle class is what slip below the FPL.
throwawaymath 8y ago
Articles written like this make me incredibly angry. Stop reading headlines and audit your news. 1. The entire basis of this "news" is a study which is cited exactly nowhere in the article. There is a passing reference to a "new study" by the "Schwartz Center for Economic Policy Analysis." They don't even give a partial author list, let alone a title! 2. This is the study in question.[1] I had to dig this up on my own by piecing together specific claims with the name of the research organization and searching for them. The study appears to be closer to policy advocation than new research. 3. The author is a business management consultant who cites himself and his company for data contributing to the article, with no alternative supporting source ("Managing Defined Benefit Plans"). If there's a bias here it doesn't seem to be explicitly called out. I can't comment on the core findings of the study, but I find its presentation and reporting in this article to be disingenuous and poorly supported. I'm deeply skeptical of the headline's claim given the incredibly politicized nature of the topic, the utter lack of critical analysis and the (intentional or merely incompetent) obfuscation of source material. If you're going to start a discussion about economic policy or financial trends, please find and submit the original study. This article is just noise - it's barely capable of engaging with its source material. Why is a CNBC article on HN instead of the primary source? ___________ 1. https://www.economicpolicyresearch.org/images/docs/research/retirement_security/Downward_Mobility_in_Retirement_P_N.pdf https://www.economicpolicyresearch.org/images/docs/research/...
- adamredwoods 8y ago
  Good catch. There's a little 'commentary' badge on the article, too.
- rapnie 8y ago
  Thank you for pointing that out! But leaving warped science, politics and hidden advertising aside - given that there exists a certain amount of this kind of poverty - are things likely to improve in the future, or will they get worse?
  - dgfgfdagasdfgf 8y ago
    C'mon, if things were getting better you'd see a lot more conflict in the world. People have accepted they're being fucked and they're looking forward to the pitchfork phase--but it's not here yet.
rundmc 8y ago
The savings rate in the US has fallen continuously since 1906 when Insurers were prevented from cheating Tontine Pensioners out of their savings. Instead of selling Tontine Pensions honestly going forward, they switched to selling life annuities which were far more profitable for the Insurers. The solution is to bring back the savings products customers want to buy (Tontines Trusts) but without the rent-seeking financial institutions.
- tfehring 8y ago
  Disclosure: I work for an insurance company that sells annuities. This is solely my own opinion, and I have no incentive to get you to buy an annuity. With that out of the way, a few comments on this: * Tontines were exorbitantly profitable for life insurers before they were outlawed - much more so than any modern products I’m aware of. * Profitability is somewhat independent of product structure in that either a tontine or an annuity can be priced to achieve a given level of profitability. * The structure of a tontine means that payments start off much lower than a life annuity and grow substantially (exponential growth with a growth rate that itself increases exponentially) over time. Most retirees would probably prefer a higher initial payment and lower growth rate, since the amount of income they need in retirement generally doesn’t increase that much over time. * While annuities are reasonably profitable for insurers, profitability metrics are lower than you might expect. The vast majority of what I’ll loosely call “profit” goes to agents and “financial advisors” in the form of commissions, not to the insurance companies themselves. While they’re uncommon due to low demand, there are annuities that can be purchased directly from insurers (i.e., without paying a commission), and the rates are probably similar to what you’d get through a trust because the expenses scale well. * If you’re totally opposed to any profit being captured by financial institutions’ shareholders, mutual insurance companies are owned directly by their policyholders and return profits to them in the form of dividends. The only potential advantage to a trust over a mutual insurance company is that the former might be able to back policies with riskier investments (and I’m not at all certain that that’s the case). * While the personal savings rate in the US has declined since 1960, I’m not sure that that’s still true when going all the way back to the turn of the 20th century. Can you provide a source for that claim?

66 points by foolrush 8y ago

Prices for everything will need to come down and people will learn not to consume for its own sake. Return to normalcy

What is "at risk"? A married couple is going to be getting over $4000/mo in Social Security, mostly tax free. Outside of a few metros, it's hard to see how that leaves one impoverished. The Baby Boomers are the whiniest generation ever.

toomuchtodo 8y ago
Can you provide a citation? The data doesn't agree with your assertion. "Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65, according to the study. The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household."
- laser 8y ago
  Twice the poverty level sounds pretty comfortable to me. Living on 75% of that in LA right now. The "Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household." sounds like real poverty, though.
  - deleted 8y ago
    [deleted]
  - toomuchtodo 8y ago
    > Twice the poverty level sounds pretty comfortable to me. Living on 75% of that in LA right now. Which is substantially easier in your 20s and 30s than in your 50s and 60s.
    - laser 8y ago
      Yeh that's fair, but will more tax create more easiness for people?
      - deleted 8y ago
        [deleted]
    - chrisseaton 8y ago
      > Which is substantially easier in your 20s and 30s than in your 50s and 60s. Huh? In your 20s and 30s you’re paying to build your pension, paying for your mortgage, paying for your kids, paying for your student debts. In your 50s and 60s you’re paying for none of that. What are you paying for at all?
      - Qworg 8y ago
        Healthcare.
      - dragonwriter 8y ago
        Except for “student debts” (which isn't all that uncommon, either) it's common for people to be paying for all those things in their 50s and 60s (adult children very often get support from their parents), and it's also quite common for people these days not to have started paying for any of then except retirement (usually not pension, except insofar as social security is a pension) building through their 30s. It's pretty likely you aren't doing much retirement savings or paying for a mortgage on an income below double the poverty level at any age.
igravious 8y ago
"The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household." You say $4000/mo for a couple = $48,000/yr – article says $15,730/yr for the worst off and $31,260/yr for the next worse off. Do you have a source for your figure?
- cheschire 8y ago
  This [0] article provides a table of numbers. There are several ways to approach $4000 for a couple, but I feel like those numbers only apply to the top 10% incomes in America. Hardly a good average. 0: https://www.fool.com/retirement/2018/08/21/heres-how-much-social-security-benefits-are-by-age.aspx https://www.fool.com/retirement/2018/08/21/heres-how-much-so...
- masonic 8y ago
  62 is early retirement. Of course one gets lower returns if one retires early.

refurb 8y ago

Warning: anecdote incoming! I’m not sure being under the federal poverty line (or 2x cutoff as this article used) means the same thing at retirement age. My mother, for example, has a monthly post-tax income of $1,400 or just under $17,000 per year. She must be poor right? However, she owns her home outright. So her total reoccurring monthly expenses are around $1,200. That includes property tax, condo fees, health insurance premium, food and gas for the car. She has a very comfortable life. She would certainly not call herself poor. She can basically live off her pension without touching the equity in her home or the savings she has (unless it’s for something important like travel). A lot of people in retirement are no longer relying on income, instead they are taking money out of savings as well. Not sure if this paper accounted for that.

murukesh_s 8y ago
Post-tax income of $1,400. Is it pension? is the pension taxed?
deleted 8y ago
[deleted]
deleted 8y ago
[deleted]
paulgrant999 8y ago
now picture tomorrow her condo floods and the car gets t-boned. Whats that do to her budget?
- WhiteSource1 8y ago
  That's what insurance is for.
  - paulgrant999 8y ago
    You didn't mention it in your budget; presumably therefore, she has none. You did mention health insurance, however.

laser 8y ago

Wait, this is sensationalized. Within the article the quote is "Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65..." And their definition of near poverty is twice the poverty level? If I can live comfortably on less than 75% of that in LA, I don't see how that could be considered poverty. The 2.6 million, which I assume implies 12% of middle class is what slip below the FPL.

throwawaymath 8y ago

Articles written like this make me incredibly angry. Stop reading headlines and audit your news. 1. The entire basis of this "news" is a study which is cited exactly nowhere in the article. There is a passing reference to a "new study" by the "Schwartz Center for Economic Policy Analysis." They don't even give a partial author list, let alone a title! 2. This is the study in question.[1] I had to dig this up on my own by piecing together specific claims with the name of the research organization and searching for them. The study appears to be closer to policy advocation than new research. 3. The author is a business management consultant who cites himself and his company for data contributing to the article, with no alternative supporting source ("Managing Defined Benefit Plans"). If there's a bias here it doesn't seem to be explicitly called out. I can't comment on the core findings of the study, but I find its presentation and reporting in this article to be disingenuous and poorly supported. I'm deeply skeptical of the headline's claim given the incredibly politicized nature of the topic, the utter lack of critical analysis and the (intentional or merely incompetent) obfuscation of source material. If you're going to start a discussion about economic policy or financial trends, please find and submit the original study. This article is just noise - it's barely capable of engaging with its source material. Why is a CNBC article on HN instead of the primary source? ___________ 1. https://www.economicpolicyresearch.org/images/docs/research/retirement_security/Downward_Mobility_in_Retirement_P_N.pdf https://www.economicpolicyresearch.org/images/docs/research/...

adamredwoods 8y ago
Good catch. There's a little 'commentary' badge on the article, too.
rapnie 8y ago
Thank you for pointing that out! But leaving warped science, politics and hidden advertising aside - given that there exists a certain amount of this kind of poverty - are things likely to improve in the future, or will they get worse?
- dgfgfdagasdfgf 8y ago
  C'mon, if things were getting better you'd see a lot more conflict in the world. People have accepted they're being fucked and they're looking forward to the pitchfork phase--but it's not here yet.

rundmc 8y ago

The savings rate in the US has fallen continuously since 1906 when Insurers were prevented from cheating Tontine Pensioners out of their savings. Instead of selling Tontine Pensions honestly going forward, they switched to selling life annuities which were far more profitable for the Insurers. The solution is to bring back the savings products customers want to buy (Tontines Trusts) but without the rent-seeking financial institutions.

tfehring 8y ago
Disclosure: I work for an insurance company that sells annuities. This is solely my own opinion, and I have no incentive to get you to buy an annuity. With that out of the way, a few comments on this: * Tontines were exorbitantly profitable for life insurers before they were outlawed - much more so than any modern products I’m aware of. * Profitability is somewhat independent of product structure in that either a tontine or an annuity can be priced to achieve a given level of profitability. * The structure of a tontine means that payments start off much lower than a life annuity and grow substantially (exponential growth with a growth rate that itself increases exponentially) over time. Most retirees would probably prefer a higher initial payment and lower growth rate, since the amount of income they need in retirement generally doesn’t increase that much over time. * While annuities are reasonably profitable for insurers, profitability metrics are lower than you might expect. The vast majority of what I’ll loosely call “profit” goes to agents and “financial advisors” in the form of commissions, not to the insurance companies themselves. While they’re uncommon due to low demand, there are annuities that can be purchased directly from insurers (i.e., without paying a commission), and the rates are probably similar to what you’d get through a trust because the expenses scale well. * If you’re totally opposed to any profit being captured by financial institutions’ shareholders, mutual insurance companies are owned directly by their policyholders and return profits to them in the form of dividends. The only potential advantage to a trust over a mutual insurance company is that the former might be able to back policies with riskier investments (and I’m not at all certain that that’s the case). * While the personal savings rate in the US has declined since 1960, I’m not sure that that’s still true when going all the way back to the turn of the 20th century. Can you provide a source for that claim?