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Millions of Americans nearing retirement age with no savings
- Pet_Ant 4y agoThe real problem is when they go from retirement-age-but-with-working-bodies to retirement-age-and-frail-elderly . That will be a real tragedy of poverty, suffering, and neglect.
- toomuchtodo 4y agoWe had pensions. And then everyone was told to use a 401k. And those previous corporate pension contributions became shareholder profits. And then wages stagnated and many people couldn’t afford to or didn’t save in retirement accounts. And now half of everyone over 55 has no retirement savings per the GAO and will rely on Social Security, Medicare, and whatever income can be scrapped together when you’re elderly. It’s going to be a shit show. But heh, at least those pesky pensions went away, amirite? Insolvent pensions are the least of your concerns when tens of millions of older Americans have a vote and are collecting an entitlement till death.
- showerst 4y agoThere were a lot of negatives about pensions; employee mobility and companies trying everything possible to weasel out of promised benefits being the biggest ones. The problem isn't retirement accounts, it's a lack of mandatory funding by employers.
- GenerocUsername 4y agoAgreed. I cannot imagine relying on a company to pay me during retirement. I get that that system existed once, but the incentives are so misaligned it terrifies me
- darth_avocado 4y agoA simple solution would be mandatory 401k contributions by employers for all workers. Even a 2500/year contribution for a worker will yield almost 200k at a 2% annual return on an average and almost 500k at a 5% return over 45 years. While by no means could independently support a lifestyle, it can definitely supplement social security. The burden for workers to save would be significantly lower.
- toomuchtodo 4y agoAustralia’s Superannuation concept is a reasonable model imho. Not only must employer contributions be mandated, but it must be very hard to get access to the funds before retirement. Otherwise, they’re just cashed out. You also have to have strong guardrails around fees and fiduciaries so it’s not a big pot of money for finance to leach off of. https://en.wikipedia.org/wiki/Superannuation_in_Australia https://en.wikipedia.org/wiki/Superannuation_in_Australia Also agree with Retric’s sibling comment.
- Retric 4y agoAt that scale there’s no reason to use 401k style personal investments that’s just pointless overhead and risk. Social Security tracks individual contributions and that’s all that is needed. Just pool everyone’s investment and pool everyone into a single safe asset allocation. We don’t use that system because individual 401k’s are extremely profitable for the companies running them. Fees can reduce the long term payout by as much as 1/3.
- klipklop 4y agoYeah the worst part is they don't have to clearly/obviously disclose how much they are taking out in fees. It just vanishes from your account unless you actually look into it. 401k's funds sometimes have fees that are multiples of Vanguard....and perform worse. Best to go into a self directed account and use Vanguard and safe yourself thousands in fees over a lifetime.
- cykros 4y agoI don't know about mandatory, as 401(k)'s aren't mandatory in the first place. But incentivization using tax code would be sensible. You're absolutely right about pensions though; people pining for the days of the fixed benefit pension rarely are all that familiar with the pension plans that simply went bust due to inability to fund their liabilities due to market conditions. At least with a 401(k), you're not running out of money because your retirement is being invested too conservatively so as to pay someone older than you, leaving it empty by the time it's your turn.
- xhkkffbf 4y agoCorporate or union-run pensions were terrible. The companies or the unions or both would fail to fund them adequately. Or if they did fund them enough, they would mismanage the investment. Sometimes they would outright steal from the pensions. Another game was simply redefining the terms, almost always reducing the benefits. This was a common game and it's almost irresistible to the managers. At the highest level, the US government is always doing when they tweak the Social Security formulas for retirement age. At least with the 401k/IRA/SEP etc, you're in control and you see the assets go up or down.
- sfhlihfdhcd 4y agoclassical "throw the baby with the water" thinking. A is broken because it cause B and C. replace A with X, which cause C and Z, with Z being as bad as B but a million times harder to fix.
- lotsofpulp 4y ago> And then wages stagnated This was the problem, not lack of defined benefit pensions. With the advent of near zero cost target date retirement funds and equity and bond index funds, there is no need to be beholden to one employer and have to trust the pension plan trustees with your retirement. Best case scenario is the trustees invest in the same index funds you would, and worst case is they misappropriate the funds or take wild risks. So why not cut out the unnecessary middleman? If you really want an annuity, then buy it from an actually regulated insurance company, rather than a DB pension plan that is doing who knows what.
- kbjkooln 4y ago[flagged]
- bryanlarsen 4y agoThe article focuses on a woman aged 66 who is delaying collection of social security to age 70 in order to maximize the monthly payout. So it's not quite as dire as you make out, as long as you stay healthy until 70.
- albatross13 4y agoWhat happens if social security is no longer there?
- bryanlarsen 4y agoIt means you're listening to a false narrative propogated by "US is broke" doom-slingers. If your left hand owes money to your right hand, your left hand might be broke but you as a whole aren't.
- lotsofpulp 4y agoYour hands can move around all the money they want, the question is how much that money will buy. This is the issue countries with declining labor force participate rates are facing. Someone actually has to clean those bedpans and do all the dirty work.
- bryanlarsen 4y agoExactly. It's the capacity of a country to do things that matters, not the number of pieces of paper it has that nominally count that capacity. Luckily there are still lots of people willing to move to America to clean bedpans.
- toomuchtodo 4y agoSocial security pays out at 80% when the trust fund is exhausted in a decade. It’s then a policy change to increase benefits back to 100% (no cap in income exposed to SS taxes). Math might improve a bit with US treasuries paying almost 4%, as that is what the trust fund invests in (specifically special issue treasuries). > By the end of 2021, the trust funds had accumulated $2.9 trillion worth of Treasury securities, earning an average interest rate of 1.4 percent during that year. The Social Security Administration provides monthly reports on the investment holdings of the trust funds, their maturities, and interest rates. The trustees project that the trust funds will earn $64.6 billion in interest income in 2022. https://www.cbpp.org/research/social-security/understanding-the-social-security-trust-funds-0 https://www.cbpp.org/research/social-security/understanding-...
- albatross13 4y ago[flagged]
- nvhkmvd 4y agoJesus Christ, HN
- idiotsecant 4y agoDon't do this. This isn't reddit.
- gcoakes 4y agoI'm pretty young, but one of my retirement plans is my children. I can't be the only one. That is an additional incentive for me to treat them right and ensure they have the means to take care of themselves.
- lsj0627 4y agoThis is very polarizing and seems to be a cultural issue. Americans and westernized cultures are appalled at its selfishness, while many Asian cultures are accustomed to this totally normal and expected part of the closer family unit.
- PuppyTailWags 4y agoI'm highly suspicious of saddling the younger generation, quite literally, to have their parents as dependents. Housing and medicine has only gotten more and more expensive. How are the children supposed to save up if they have to feed, house, and pay for the healthcare of their children and their parents simultaneously? At some point something is going to shatter in that generational chain if the cost of everything continues to go up.
- ryandrake 4y agoI agree--it's nice if they can help and are willing to, but it's kind of gross and presumptuous to simply assume they will help or obligate them to help. A parent is obligated to care for a child because [in most cases] they chose to have the child. The reverse is not true. Nobody chose to be born.
- antisthenes 4y ago> At some point something is going to shatter in that generational chain if the cost of everything continues to go up. Maybe that's the final push we need to adopt universal health care like the other civilized countries? When the cost of caring for Boomers will become too high for younger generations to bear, it will either solve itself out through policy or lots of misery.
- 4y ago
- BenFranklin100 4y agoThe problem may be worse than we think. Many Boomers hold a significant portion of their wealth in their homes.This “wealth’ has increased greatly due home asset price appreciation. To exercise this wealth, they must sell their homes. However, due to the same NIMBY politics Boomers have championed, there are few inexpensive downsizing options, leaving Boomers with little excess cash for the expenses of older age. Boomers have hoisted themselves by their own petard.
- GenerocUsername 4y agoI keep telling my older relatives this: yeah your house is now 800k, but so is the house you want to move to... It doesn't matter when it goes up since you can only ever move laterally or downgrade.
- SkyPuncher 4y agoHousing prices only matter if you're significantly changing your situation. Entering, exiting, upsizing, and downsizing. Even then, entering and upsizing is generally a long term play where price differences are distributed.
- Turing_Machine 4y ago> I keep telling my older relatives this: yeah your house is now 800k, but so is the house you want to move to... Well, the nice thing about being retired is that you can live anywhere you choose to live, more or less. You don't have to pay $2-3k/month to rent a rathole apartment in Silicon Valley when you're retired. The median house price in San Jose, CA is $1.1 million. The median house price in Gulf Shores, AL (a pretty nice resort area) is only $479k. If you went for a less-resorty area, say Biloxi, MS, you could get by for only $207k. Edit: you could even have a summer place in Maine (median price: $299,000) and a winter place in Biloxi (median price $207k) and still spend less than half what the San Jose house would cost.
- Kon-Peki 4y agoSure, Gulf Shores is nice and has a huge retirement community, but there is a reason that it has lower house prices and drastically lower property taxes than just a few minutes down the road in Pensacola. There aren't a lot of services. The hospital in Foley isn't super impressive compared to something you'd see in the Bay Area. The local amenities are way more focused on partying and/or kids, too. And finally, of course, is the weather. Winter on that part of the gulf isn't as warm as most people are looking for. You certainly aren't going swimming in the ocean, or even an outdoor pool unless it is heated. You'll have plenty of winter nights at or near freezing.
- ryandrake 4y agoI'm a big proponent of retirement savings. I read Bogleheads, know the rules and limits around IRAs, 401(k)s, capital gains taxes, backdoor and mega-backdoor Roth, Roth 401(k)s, and so on. Not an expert by any means but squarely a retirement savings nerd. A lot of the problem is nobody in their 20s and 30s wants to hear about it. Even here on HN, when you bring the topic up, people's reactions range from "La la, I can't hear you!" to "Bro take that vacation and live in the moment, don't save for a day that might not come!" I think my highest-downvoted post ever here was something like "Maybe it's not financially wise to spend your 20s backpacking and finding yourself." I know a lot of people in my age cohort who don't have even a dime saved up. And these are not the average struggling American like in the article. They're privileged well-to-do techies. They don't have the very critical "pay yourself first before paying your bills" mindset. I don't know what their plan is if they get critically sick to the point where they can't work, or when their health inevitably deteriorates in their old age. They just kind of shrug and say I'll cross that bridge when it comes. Trading in the Tesla is not going to pay for assisted living.
- PuppyTailWags 4y agoI don't think Bogleheads applies for the vast majority of americans. The article in question is about a 66-year-old single mother of three, working two jobs. She's most certainly not figuring out capital gains tax.
- Ozzie_osman 4y agoBogleheads isn't about capital gains tax. It's about steadily investing in a passive portfolio, dollar cost averaging in, and taking advantage of compounding returns. It's also about living frugally below your means, but not everyone wants that second part :)
- Retric 4y agoMany people don’t have a realistic option to live below their means. Not only do people make little money the US government literally kicks you off food stamps if you have 2,000$ in the bank.
- Overtonwindow 4y agoI can retire very comfortably tomorrow, so long as I die by next Wednesday.
- betaby 4y agoIt's impossible to save because of the inflation, high cost of living and taxes. It was never possible historically speaking and we are no different today. Question we have to ask, how that happens that with taxes taking like 50% we can't provide people with pensions.
- andsoitis 4y ago> It's impossible to save I vehemently disagree. The basic issue is that people live beyond their means and it is facilitated/incentivized by a consumer society and a basic human “flaw” of optimizing for the short term and not the long term, financial illiteracy, amongst other things. Thinking you can have 3 kids and drive a new car etc etc when you don’t have the means but will use a credit card is not a good financial startegy. But then again, very few people think about money and plan…
- idiotsecant 4y agoIt's completely possible. The typical HN reader has plenty of resources to do so. If you're making median wage or better and not saving a substantial portion of your income, there are almost certainly changes you could make to improve your savings dramatically.
- nomel 4y agoA group of us at work ended up talking about retirement. I always assumed these guys were paid significantly more than me. They had big houses, expensive cars, and several have their kids in private school. It turns out they’re not saving anything. They’re at max burn rate, cashing out their RSUs as soon as they vest. At a FAANG table of 5, I was the only one doing anything outside of 401k. I’m also the only one without a Tesla.
- betaby 4y agoArticle is about 'Millions of Americans'. US folks with the FAANG salaries is a rounding error in the 'retirement age' group.
- lakeshastina 4y agoI think we should only expect this situation to get worse, and apply to a majority of society. This will then perhaps further incentivize the Govt to put in place some sort of a universal basic income type of program. This segment of the population is most likely to vote, so it will not be long before we vote ourselves all the money. Thoughts? Comments?
- Retric 4y agoIt’s not UBI but Social Security is filling that role for the disabled and elderly.
- rhacker 4y agoWhere would UBI money come from?
- dragonwriter 4y agoIts willed into being by the government, like any other money in a fiat money system. If you are asking what will be done to offset the monetary effects of the additional government spending, then “increased high-end taxes, starting with taxing long-term capital gains the same as other income”. If you are appealing to the myth of necessary fiscal balance in government operations, well, that’s a myth, but same answer as the monetary answer, to the extent anything is done.
- InitialLastName 4y ago> “increased high-end taxes, starting with taxing long-term capital gains the same as other income”. This, plus finding a way to make people update their cost basis (and pay capital gains taxes) on property that they want to use as collateral for debt.
- idiotsecant 4y agoMoney doesn't have to come from anywhere - see the record levels of corporate UBI that have been handed out in the form of quantitative easing for the last few decades, PPP 'loans', and tax hacks formatted to save these entities money. There isn't some bag that money comes out of and once you run out of it it's all gone. There are certainly consequences to be paid when you do that, but so far we seem fine with those consequences when they benefit the most powerful among us.
- Ozzie_osman 4y agoMany countries have good social safety nets. Many other countries have social ties, where the parents support the kids until they get too old, then the kids support the parents. The US doesn't really have either.
- masterof0 4y agoYup, people just save enough money to get to an assisted living facility, hoping strangers will take care of them for money. Very sad.
- MadSudaca 4y agoI think many countries will have problems with their elderly in not too long, regardless of how they handle retirements for their population.
- deleted 4y ago[deleted]
- sjellen 4y agoThere are many reason for this of course, but a very high divorce rate for the retiring generation doesn't help.
- ilamont 4y agoSuch articles would be more helpful with more details. What career did she have that did not allow her to save for retirement? Was she always single? What social security benefits does she have access to? One thing I hear about a lot is people attempting to live off social security payments, which is usually not enough. I wish that there was flexibility to contribute more than 6.5% (or whatever the personal contribution is) to social security as well as IRAs, which are capped at $6500 or $7500.
- lsj0627 4y agoYou can contribute far more to a 401k or Solo 401k if you're employed or self-employed, respectively.
- bubbleRefuge 4y agoThis is a tragedy. In an world of fiat currency and within the Modern Monetary Theory operational paradigm, the US Federal government can meet all its financial obligations because it is an issuer of currency. So, in this regime, the issue should never be about financing a future. Social Security benefits should be adjusted to provide a living income to the retired. The real question, as MMT literati have stated, is will we have the goods and services (ie Production) available to meet the needs of folks retiring ?
- spicyusername 4y agoI'm not super familiar with MMT. What is the rationale MMT provides for why increasing the supply of money available to the elderly would not lead to inflation on all the goods that the elderly purchase with that money?
- bubbleRefuge 4y agoinflation should be a limiting factor instead funding being a limiting factor as it is today. So the focus should be on providing enough production ( ie supply ) in the economy to meet demand. Not necessarily worrying about balances in federal accounts which is the current narrative.
- helf 4y ago[dead]