November 20, 2017
Income Inequality: A Growing problem for Retirees
I few weeks ago I asked why it is such a struggle to save enough for retirement. The post gave several reasons, most of which are part of the human condition. We procrastinate or make excuses. One comment, though, stuck with me. That reader suggested that for too many, the reasons they don't save is because they can't: there is barely enough to survive, much less invest for the future.
She was right, of course. For those of us lucky or privileged to enjoy a satisfying retirement, and I am definitely in that category, the types of problems she identified are hard for many of us to grasp. In fact, the reaction may be to blame the person who isn't doing well for their own fate or lack of planning. But, stepping back for a moment and looking at what is happening in our society and the world may bring a fresh understanding to these struggles.
It is not new information that income inequality in the United States is increasing. The rich control more of the nation's (and world's) wealth, while many middle and lower class folks find themselves drifting sideways or declining in economic terms. Recent figures suggest the top 1% control 39% of this country's wealth. That means just over 3 million of our fellow citizens have the economic power to directly affect the lives of 125 million of us.
What is of special concern to readers of this blog is that among seniors the economic inequality is growing faster than the population as a whole. According to a recent study, only those 65+ in Mexico and Chile have seen the gap between well-off and low income seniors increase faster than in America.
The loss of many well-paying jobs along with the rapid decline in employer-funded pensions are major factors. Less than half of today's workers have a retirement plan at work that isn't completely self-funded. Wage and benefit inequalities follow us from the working world into retirement. With fewer resources to save and no help from employers, the cycle of falling behind starts early and gets worse as we get older.
Social Security has had minimal COLA increases for several years, not enough to stay even with inflation or increases in Medicare premiums.
Relentless increases in health care costs affect retirees just as the need for those services grow with age. The percentage of the population that is medically obese is higher in the United States than in any other developed country. Some of that obesity is self-inflicted, some is not. Regardless, this serious health risk is more prevalent among the poorer segments of society, putting an even greater strain on economic conditions.
Lower income seniors must depend on less-than-sufficient savings and Social Security to get by. The luckiest ones may be able to lean on their family for extra help. But, such is not the case for most. America has the self-image of being the richest nation on earth, yet, that richness is very concentrated among a very few. Too many on the fringes must fend for themselves.
I don't have a magic answer to balance things out. There is no snap-of-a-finger solution. There are some common sense steps to take, but they require more awareness of the problem than we have exhibited recently. They will require we admit that we, as a society, have a problem that is having serious consequences to our social fabric, a problem that is getting worse over time.
Any specifics that I list could open the door to a political tug-of-war, something I'd rather avoid. But, in general, policies that encourage retirement savings through tax-advantaged programs, incentives for employers to strengthen retirement savings accounts at work, and a tax code that doesn't tilt the playing field so obliviously toward those who are doing just fine would help. Strengthening the support system for those who struggle with medical care seems like a helpful step.
Our economic system of capitalism has always produced winners and losers. Some people will be poor stewards of their resources and not prepare for their future. Those are not the people I am writing about.
What is happening now is the senior, the retiree, is becoming one of the most vulnerable segments of our population. In addition to expressing your feelings to your representatives and voting your beliefs, I urge you to look for ways to be more personally engaged. Help an aging family member or relative who is struggling. Find some time to volunteer at a senior center or hospice organization. Decide that some of your charity donations next year will go to support struggling seniors. Help a senior prepare his or her taxes so expensive mistakes aren't made. Visit a shut-in with a meal every once in awhile. Walk an elderly neighbor's dog or offer to take a pet to the groomer.
As individuals we can't solve the income inequality dilemma. But, as individuals maybe we can find a way to help a struggling senior find a bit more joy in life, and ease a person's burden even just a little.