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. 


  1. This comment has been removed by the author.

    1. As I said in the post, those who don't plan, overspend, and assume things will work out are not the focus of this post. It is the growing group of seniors who were never in the position of saving, investing, or preparing because they were just able to get by on what they earned during their employed years.

      Or, the ones who had a longtime employer change the "rules" somewhere along the the way and dissolve a pension after bankruptcy, unpromise medical care after retirement, or in any number of ways find themselves in rather dire straits after work has stopped for them.

      These seniors are increasing in numbers and desperation. They are the ones that need our help and care.

    2. This comment has been removed by the author.

    3. Thanks for being part of the discussion!

    4. As someone who works with the working poor, I'm going to have to disagree with Marti. It's easy to judge, but I work with single moms who get no benefits, often no child support (or if it's awarded, it's not collected. It's all very nice to say "leave beneath your means", but there comes a point on the economic scale where there is simply nothing to cut. If as a nation we don't come to realize that, we are in serious trouble. Kids dont need expensive things, but they do need things and food. It's obvious that I have a huge problem with blaming people "on the choices they make". There is a huge population in this country that simply has no choice and it needs to be recognized.

    5. And I apologize for the fervor. I actually have a blog post coming out tonight or tomorrow about "when there is nothing left to cut", and my research as part of that on top of my work with the long term working for has put me in qiute a place these days!

  2. A well timed article. My wife and I were discussing the other night how fortunate we are. I'm certain we are not members of the 1%, but we are fortunate to be better off then a lot of folks. Saving for the future is difficult in the best of circumstances. The human mind just does not seem built to think that many years in advance. And then if you throw in difficult circumstances like job losses, medical issues, family that needs help, etc., it does seem nearly impossible.
    I like your thought. If we all just give a little time and/or money - a bit of whatever we have available - the world around us would be much better.
    I really enjoy your blog. Keep up the good work

    1. For those of us who managed to be in relatively good shape at this stage of life, I feel it is our duty to help fellow citizens who are not, through no fault of their own. Sharing a bit of ourselves and our resources is part of our bond with all of humanity.

      Thanks for the blog compliment.

  3. "If the peasants have no bread let them eat cake"
    - attributed to Marie-Antoinette

    Whether she actually said this is up for debate but the usual interpretation of the phrase is that Marie-Antoinette understood little about the plight of the poor and cared even less. It seems our culture has moved in a similar direction.

    You make a good point in your closing sentence "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."

    That's something we all can do.

    1. It doesn't take much to bring a spark of happiness or even a smile and a laugh to another. It just takes a little awareness and a little effort. So many of our fellow seniors (and others of all ages) need to know someone cares.

  4. I would venture a guess that many/most of us on your blog, yourself included, were not born with the proverbial silver spoons in our mouths. We oftentimes went to school and got an education, worked hard and saved just as hard, and now are reaping the fruits of our labor. For others who had the same opportunities but chose to squander them for whatever the reason, I have zero sympathy. Who I have sympathy for are those who did everything I mentioned and find themselves in worse off straits due to external factors such as illness, job losses, or the myriad of other problems you and commenters have raised. Those are who we have a duty to help.

    The problem becomes, how do you differentiate the two groups? I know many who will spin an outstanding story of how the "system" screwed them, but I know for a fact they were horrible stewards of their resources. Unfortunately these people tend to be the most vocal about needing help, leaving the person who is suffering through no direct fault of their own to continue their path.

    So what am I trying to say? As you and others have stated, give a hand up to those who you can more directly help, where you know their situation better. For example, Deb's Mom was left a widow at a young age and had her husband's pension stolen by the firm he worked for. We were her sole support for many years before SS kicked in, and continued to support her up until the day she passed. My charitable giving now is strictly to local charities here in TN where I have a better understanding of both the charity and those they help, including the elderly (I refuse to help any national charity paying outrageous salaries to ex-CEOs and ex-Generals who are already well taken care of, and should be volunteering for the positions anyways). We really amped up our giving this year both in $, goods, and time since the need seems to be getting greater. Perhaps that is helping the non-elderly as well as the elderly, but it is difficult to find groups that are geared strictly to the elderly, when the need is so great across many age groups.

    It is always good to see when others talk about how the make the situation better, rather than make it just another political rant against the current or former administrations. Thanks for keeping it such, Bob.

    1. I think you can tell the difference between those who squandered their opportunities versus those who didn't: attitude. Those who play the victim card and complain about unfair it all is are likely the product of bad decisions. Those who don't complain, make the best of a bad situation and gamely struggle on are the ones who got screwed somehow by life. Those are the ones I am speaking about and feel compelled to help.

      Your comment about local versus national charities is an interesting one, and something I hadn't really thought that much about. Some national organizations, like Goodwill, are the beneficiaries of our excess household goods because I am convinced they are making proper use of the money from their stores to help train and hire underprivileged folks.

      But, when you read stories of multi-million dollar salaries of other major charities, it can turn you off. I like the idea of focusing on local charities, those that keep the money or materials here, in a way that their efforts can be seen. Betty and I continue to support the local prison ministry organization that I worked with for several years. While I no longer am active with them, they continue to help turn lives around here in the Phoenix area.

  5. I have been very fortunate in that I worked my way through graduate school and was able to secure a professional appointment, with a pension. That has allowed me to retire in comfort.

    In recent years I have offered to mentor some young people (and a few relatives) about finances. Many are not getting any help or appropriate role modeling from their parents. Teaching people about budgeting, saving and delaying gratification can go a long way toward solving some problems in the future. Not everyone takes my advice, but many do and it is gratifying to see their stress levels drop and confidence build. I have been impressed by the courage I have witnessed in single parents, working several jobs to make ends meet, often coming from backgrounds of multi-generational poverty. They are some of the most inspiring people I know.

    Tougher, are the members of my own generation, who should be ready to retire but cannot. There you must help them triage their circumstances and face reality. This usually involves downsizing and selling off "toys." I have found that if people are willing to do what they need to do, when they need to do it, whether they like it or not, I then am more willing to help with some occasional financial support or the goods and services they need.

    It is a difficult problem that I only see getting worse. I think there is a "tipping point" out there somewhere when income inequality leads to social upheaval. Our government cannot seem to act unless faced with a crisis. I think one may be looming.

    Rick in Oregon

    1. I applaud your efforts at financial literacy 101 type work. You are correct in that parents and our educational system doesn't take financial studies seriously. Left to their own devices, people respond to the siren call of a consumer culture that prefers people up to their eyeballs in debt.

      One of the reasons I teach 4th and 5th grade Junior Achievement classes is to help instill a basic understanding of how our system works and what each child needs to learn to take part in a reasonable way. It is no substitute for more detailed teaching, but I think it helps.

      I am afraid you are right about the looming crisis in income inequity.

  6. I have known several fine, hardworking folks who had their pensions decimated by bankruptcy of their longtime employers, or who have come down with crippling diseases where they cannot work (and have crushing medical bills) and others, who because of divorce, had an ex-spouse decimate their bank accounts. The Great Recession also made a mess of several folks I know, they lost jobs, and could not find another because they were in their early 50's and no one around here would hire them.

    1. The situation many people find themselves in is not of their making. They are the ones I worry about. The supposed safety net is rather porous and becoming more so with each passing year. WE are failing these people who deserve better.

  7. As usual, a lot of thoughtful discussion here Bob. I just want to add a couple of points.

    Your post reported that many seniors are now having problems just making ends meet but hasn't that really been the case for most generations especially those who grew old before Social Security. This is nothing new...

    The second point is something I saw yesterday on GPS with Fareed Zakaria. It was mentions that the three richest men in the US (Gates, Buffett,Bezos) have more combined wealth than the bottom 60% of the US population! It was never this skewed this badly even during the industrial revolution. And yet the current tax law proposal trying to get rammed through congress wants to give them even more by taking it more away from the 60%. If only the 60% all voted that could quickly change. Unfortunately that is probably the lowest participating group during any election. I just got the book "Principles" by Ray Dalio about the quote above, I would highly recommend it to anyone interested in this topic.

    1. What is new, and the focus of this post, is that the gap between those doing well in their senior years and those being left behind is increasing faster than for any other age group. There have always been seniors who have struggled to make ends meet, but the divide is increasing. With government not addressing the problem, that leaves it to family and us to not ignore these folks.

    2. Exactly. I appreciate your touching on these points.

  8. I often think about this reading (source unknown):
    You can read…
    … so you are luckier than over one billion people who cannot
    read at all.
    If you woke up this morning with more health than illness …
    … then you are luckier than the million who will not survive
    this week…
    … and even luckier because you have a provincial healthcare card
    that guarantees you will have healthcare in case of illness.
    If you have never experienced the danger of battle, the loneliness of
    imprisonment, the agony of torture, or the pangs of starvation...
    … then you are ahead of 500 million people in the world.
    If you can attend any meeting you want—political, religious, social…
    … then you are luckier than 3 billion people in the world.
    If you have food in the refrigerator, clothes on your back, a roof over
    your head and a place to sleep…
    … then you are richer than 75 per cent of this world.
    If you have money in the bank, in your wallet, and spare change in a
    dish someplace…
    … then you are among the top eight per cent of the world’s wealthy.
    If you can read a list like this, then you don’t belong to the 1 billion
    people who CANNOT read...

    1. Puts it into perspective but doesn't address the real pain and suffering of seniors who have to choose between medicines and food, or heat and rent. Yes, they are luckier than many, but since they live in the Western world I'm not sure it is a fair comparison to the plight of many in third world countries. That seems to be an apples and oranges comparison.

      Even so, it is good to be reminded of the overall conditions in our part of the world versus others.

  9. We always seemed to know we had to save money to be safe and secure. We took a bit longer than most to get good careers, as we had to put pourselves through We worked.We saved. We bought houses that were NOT at the top of what the bank said we could “afford!” We don’t have pensions.We have to be more careful than we originally planned, as 2008 changed our investment strategy. In the past, elders lived with their families. Both Ken and I had grandparents living with us.That doesn’t seem to happen anymore. I think extended families are a great idea spiritually,socially,economically. But with one son who loves to travel, and is not married,it’s not gonna happen for us!! I don’t know what to say or do about people who did not plan ahead. It wasn’t always easy, Sometimes we had t sacrifice immediate pleasure for the future and security. That does not seem to be the American way,currently!!

    1. The real issue is not the people who don't save but the people who can't: poor pay throughout their working years meant paycheck-to-paycheck existence, an employer who uses bankruptcy to avoid pension or health payments, or a life-shattering illness that takes any savings.

      These folks are left on their own except for barely survivable levels of Social Security checks. Medicare and Medicaid are both under attack even as their monthly rates are set to go up, far exceeding the minimal bump in COLA increases for SS next year.

      What doesn't seem to be the American way currently is to take care of those in our midst who need our help...not our pity, but our support so a situation they did not choose or cause does not destroy their last few years of life.

      This is not about sacrificing current pleasure for future security. It is about basic human decency for the poorest among us who are trapped in a system that is tilted against them and gets worse year after year.

    2. I wanted to add to your comment about multi-generational, extended family support. That is something that our culture has moved away from and has lost something in the transition. Being there to help family members, like you and Ken did with grandparents enriches everyone's lives.

  10. Hi Bob - I'm quite a few years from retirement, but I really enjoy your blog!

    Thank you for this post. I think it's important to highlight the need to give back to the community and those around us. In particular, I think we need to recognize that sometimes bad things *DO* happen to good people. It's not about how to avoid helping people who "don't deserve it" - it's about helping people who, through no fault of their own, need help.

    I would suggest that pretty much everyone has needed a helping hand at some point in their life - emotionally, spiritually, and/or financially. Many of us were fortunate to receive that help from a friend or family member, but when someone doesn't have that safety net, I think it's important that society, either formally or informally, help them out.

    Regarding an earlier comment about concern with charities using resources wisely. I use the non-profit site to vet the charities I give to. The site rates thousands of charities based on financial accountability and transparency, and I particularly like that it identifies how much of a charity's funding goes to overhead vs. programs.

    Keep up the good work with these thoughtful and thought-provoking posts!

    1. Thanks for that web site reference regarding charities. Transparency in how money is used is very important. To read of a CEO of a charity living a lifestyle more appropriate to a Wall Street banker is more than galling, it is nauseating.

      Have a great Thanksgiving!


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