Several years ago, I asked why it is such a struggle to save enough for retirement. The post gave some reasons which are part of the human condition. We procrastinate or make excuses. One comment, though, has stuck with me ever since. That reader suggested that too many don't save because they can't: there is barely enough to survive, much less invest for the future. Factor in this year's bout of inflation right after the pandemic mess, and her point is even more valid.
She is right, of course. For those lucky or privileged to enjoy a satisfying retirement, and I am definitely in that category, the 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 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 an ever-increasing share 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 33% of this country's wealth or more than the country's entire middle class. In the last year, these privileged few gained $6.5 trillion in wealth.
What is of particular concern to readers of this blog is that among seniors, the economic inequality is growing faster than the population. While all studies don't agree, there are solid projections that at least 15% of households with someone 65+ live below the poverty level. That percentage grows with age.
The loss of many well-paying jobs and the virtual elimination of employer-funded pensions are significant factors. Less than one-third of today's workers have a retirement plan at work that isn't wholly 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 worsens as we age.
Social Security has had minimal COLA increases for the last few years. The bump for 2023 is projected to be substantial but, probably not enough to provide much relief with inflation or increases in Medicare premiums likely.
Relentless increases in health care costs affect retirees just as the need for those services grows with age. A new law that allows Medicare to negotiate lower drug prices will help. Cheaper insulin shots will be welcome. A cap on yearly personal drug expenses is good news. But, the fact remains our health care system is designed to produce profits before healthy people.
Social Security has had minimal COLA increases for the last few years. The bump for 2023 is projected to be substantial but, probably not enough to provide much relief with inflation or increases in Medicare premiums likely.
Relentless increases in health care costs affect retirees just as the need for those services grows with age. A new law that allows Medicare to negotiate lower drug prices will help. Cheaper insulin shots will be welcome. A cap on yearly personal drug expenses is good news. But, the fact remains our health care system is designed to produce profits before healthy people.
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, and some is not. Regardless, this serious health risk is more prevalent among the poorer segments of society, putting an even more significant 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 wealthiest nation on earth, yet, that richness is very concentrated among a few. Too many on the fringes must fend for themselves or do without.
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 need for us to admit that we have a problem that is having severe consequences for our social fabric, an issue 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 an obvious 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.
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 wealthiest nation on earth, yet, that richness is very concentrated among a few. Too many on the fringes must fend for themselves or do without.
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 need for us to admit that we have a problem that is having severe consequences for our social fabric, an issue 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 an obvious 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 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 a while. 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 people, 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.
In Canada we have what is called a Guaranteed Income Supplement (GIS) for seniors 65+ that qualify for our Old Age Security pension (OAS). OAS an non-contributory pension determined on length of legal residency in Canada between the ages of 18 and 65 (not citizenship but legal residency). If you qualify for OAS and if your income is below the poverty line, however they determine that, then you are topped up to get you over the poverty line, though just barely (like $5 over) it's not easy living by any means. As a result poverty among the elderly in Canada is at 6.7 per cent and much lower than for children or the working-age population. We also have the employer-employee contributory Canada Pension Plan (CPP or QPP in Quebec) and realistically if your if CPP pension is at the average or higher you will not be eligible for the GIS.
ReplyDeleteIf your income from all sources in retirement is high enough (about $80,000 per year per person) you will also start losing your OAS pension at the rate of 15% per dollar over that amount and your OAS pension will be entirely gone when you reach about $130,000 per year. People here often worry about the dreaded "OAS claw back" but my opinion is that if you are a subject to OAS claw back your retirement finances really shouldn't be a problem. As a contributory pension CPP is not affected by income and you receive it just the same no matter your total retirement income.
Is this the best way to address senior poverty? I can't say, there are arguments for and against it, but that's the system we have.
Leave to bureaucrats to devise such a convoluted system. I thought our methods of helping poorer seniors were difficult to navigate. Canada has us beat!
DeleteI have written several posts in the past explaining the basics of Medicare and Social Security for Americans. Even those of us who grow up with a particular system still need to review the core provisions!
DeleteBob, I am not a big George Bush fan but both he and Al Gore had plans to make social security contributions set aside in investment accounts instead of just going out as soon as it comes in. If a twenty year old saves $ 100 per month from 20 to 30, then invests no more by the time they retire they would be a millionaire. The issue is to make all working people savers and investors so they can have a secure retirement. If the government doesn't force people to save they won't. People don't think of economic opportunity costs when they spend their income.
ReplyDeleteThe idea has plenty of attraction to help the problem. Unfortunately, there is a strong "don't trust the goverment" mindset. Baically enforced savings would never survive the political blowback.
DeleteThose who can't save because of income limitations are very different from those who won't save. I have all sorts of sympathy for the former, very little for the latter.
This would provide a big boost for those presently invested, but do little to improve the long term results for the current 20-30 year old. The new poverty level would be a million because they would all have a million at least and prices would increase to reflect that sum. Al Gore (I'm so important that I have to fly a private jet to get to green conferences) is always self serving.
DeleteIn UK we now have automatic enrolment for pensions, which in simple terms requires employees to pay 5% of their earnings into a pension fund and the employer a minimum of 3%. This is in addition to the state old age pension which is earned primarily from up to 35 years of national insurance contributions. It's not a perfect system and doesn't absolve the need for additional provision depending on the kind of retirement you aspire to. Fortunately our medical care is covered by the National Health Service- essentially free from cradle to grave.
ReplyDeletePersonally, I believe an advanced, developed country owes all citizens medical care as a basic human right. I see it no differently than access to safe water (overlooking Flint and Jackson for the moment), oversight of food and prescription safety, and security against crime, both foreign and domestic. I know a bunch of my fellow citizens disagree, but there you go.
DeleteBritain's retirement/savings system seems quite logical. I hope the current upheaval your country is going through with energy prices and inflation don't result in cutting any of these sensible laws.
Your reference to medical obesity brought to mind a recent conversation with my primary care physician at an annual exam. I commented that we eat well, nutrition-wise, but it's not cheap to do so. She immediately expressed her concern for her patients at the lower end of the economic scale. A diet that's lower in cost is often lower in nutritional value which leads to more health issues. Apparently, they're seeing this play out in their family practice. She was both horrified and frustrated that this issue doesn't seem to be a priority for community leaders and policy makers. My heart goes out to people who want to feed their families well and are struggling to do so.
ReplyDeleteThe large increase in business at stores like Dollar General is an obvious sign people are looking for ways to shave food and household expenses. Fast food is usually unhealthy, and now, increasingly expensive. The problem of lower income families eating food that is filling but not always healthy is an important point, Mary.
DeleteIn my Maine county (with higher than average levels of poverty for the state), a local hospital has developed a Nutrition Center. They run the weekly farmers' market, where SNAP benefits are welcome and where those with low income can earn $1 in "harvest bucks" that can be used at the market for every $2 spent. The Nutrition Center also developed a mobile farmers' market, the "Good Food Bus" that visits neighborhoods that are relative food deserts on a set weekly schedule. These are practical solutions that work.
DeleteI like that idea..inventive and helpful, especially the Food Bus.
DeleteIf your wages are low, your social security is as well. My friend’s mom (single parent) always worked as a CNA or store clerk into her late 70’s. Her SS is under $800 a month. $100 a month of forced retirement savings was the difference between heating, or not, earlier in life. Maybe she could have made more if she went to college (20% of her generation) or married someone who made more or had parents who had money/land, but she didn’t. She has family who supplement, but more and more boomers chose not to have children. She lives in public housing- owning nothing. She is thin…so no issue there.Her tax forms are simple. In the last generation a “maiden aunt” would live with a sister.
ReplyDeleteHome ownership is actually key to successful low income retirement. The shelter is becoming more scare with the purchase of low income areas to be gentrified. Are we part of REITs that do this? It is now popular to buy trailer courts occupied mostly elderly residents. Then they drive them out with increasing HOA or land rent rates. There are 10 million owners of Black Rock- most famous for this. Yes there is the 1%, but most of us help them get there to get the dribbles off their chin.
Our tiny food pantry served 179 families this week. Most were elderly. Most are fortunate though, they own their house. Keeping them sheltered is huge. Recognizing that a great retirement is invested in a good community is key as well.
There is so much of this out there. My mom's SS is healthy because her husband's SS amount transferred to her when he died. Left to live on her own amount, she would be impoverished. But even with a good SS total, it's hard for the elderly now. And those with small SS payments are a big concern.
DeleteAs for Black Rock, I will just say private equity has damaged this country on so many levels, it's hard to keep up. Trailer courts are another horrifying example.
I want to emphasize one particular part of the anonymous comment: community involvement. When we see a problem it is too easy to send "thoughts and prayers" but not get actively or financially involved. These people could be us, with just a few different circumstances in life. We cannot turn our backs on our fellow seniors who are struggling just to survive.
DeleteAnd, the trailer park situation Hope mentions is heartbreaking. The drive for greed, regardless of human cost, is one of the more disgusting traits of human beings.
A friend for more than 50 years worked hard all her life until the hospital where she worked in medical records was bought by another and she was let go when just over 60. Morbidly obese and taking care at that time of an adult daughter disabled by complex regional pain syndrome, she never found another job. Although she worked hard and was an asset to both doctors and patients, she earned very little. She's now wheelchair bound, living alone in a subsidized housing apartment where she does not have access to the outdoors without help, she's struggling. She qualifies for several services, but not too long ago, I found out that she wouldn't make a needed doctor's appointment because she'd lost 80 pounds in the aftermath of the Covid she picked up from one of her carers and did not have anything that fit her to wear to a doctor's appointment. Of course, I am now taking over the task of buying her enough that she's comfortably dressed, in the hopes that she gets adequate healthcare and will one day be able to and willing to visit the active senior citizens' center in her community.
ReplyDeleteAs much as I sometimes dislike Amazon for their practices, undercutting author's royalties, hiring practices, etc., their pharmacy might be a game changer, too.
She is very fortunate to have you as a friend, Linda.
DeleteWhen I was next in line for the premenopausal breast cancer that hits Mom's family, I was 40. She stayed every night with me so that my husband could go home to our ten and fourteen-year-old girls. I swore to myself then that I would always be there for her.
DeleteStories like this need wider spread, because they reaffirm the ability of humans to act in someone else's best interests, not something we here much about anymore.
DeleteFood inflation is a frightening thing and the worst for low income people. When one of my daughters was in grad school, she introduced me to a cookbook called "Good and Cheap: Eat Well on $4/day." The author, Leanne Brown, created it during a masters' program in food studies at New York University, and designed it to fit the budgets of people living on SNAP, who at the time of her writing had about $4/day to spend on food. I believe you can download a PDF of it free at good-and-cheap.pdf.
ReplyDeleteI pointed several people to that same book, Hope Springs. The recipes were innovative and interesting.
DeleteI Just downloaded the pdf version as well.
DeleteHubster is a spender not a saver. I am so grateful that his employer has had a 6 7/8 mandatory investment in retirement from day 1. And after 10y I finally got him to increase to the fed max! His fund is looking fantastic after just 29 years!!!! what people never had in hand is never missed. I donate to help programs regularly while I will not feel bad about my choices and my Blessings.
ReplyDeleteA majority of broke seniors I personally know lived big, lived on debt and now suffer their choices. I have little empathy for them. Those who always worked minimum wage jobs? I empathize yet they too made choices.
I won't begin to discuss policy changes that made finances hard for us with significant increase in our taxes while the wealthy got breaks. We worked our way through it (literally).
I don't apologize for the good luck, family genes, and hard work that has powered my retirement, but I know I am not typical of all retirees. I believe in the "pay it forward" mantra.
DeleteI don't agree that all those who worked for low wages made an active choice. Where one lives, the color of one's skin, educational levels, and just plain bad luck play a role for too many in that situation.
What I hear you saying is that fortunately you married ( and stayed married) to the man you did. Fortunately his company forced to take money out for retirement and invested it for him. Fortunately he made enough in the last 10 years that he could up his savings to the max- which is approximately half of what the medium income in the US is. Yet, if those fortunate things did not happen to him- or he divorced you 15 years ago- where would you be?I am equally fortunate. My friend’s mother was not so fortunate. I know good solid men and women who worked hard and were never fortunate enough to easily cruise through a satisfying retirement. I don’t feel bad about my retirement. I do feel the need to help others who struggle.
DeleteI saved my own retirement actively my entire career-I am not , nor have ever been, dependent on my husband's income nor his retirement.
DeleteThere is much I believe we should do in this country to help others. I do what I can and have for decades.
I do realize there are people with no choices in our culture. I was speaking to people I know. I'm not cold-hearted and it seems that is what came across in my words. It is challenging at best, to put in words all the feels/thoughts.
Well said. I now understand. Thank you for clarifying.
DeleteGood post- thought provoking. No doubt luck plays a lot into what life will be like in retirement. I believe we'll be the lucky ones, even with choices, we had options many didn't have. Divorce in older years is a huge hit to many women. I suppose men too, but I've not seen them suffer the same. Food shelves have many seniors using them. You do a good reminder to make sure we watch both ends of the lifeline. On another note, I may have lost a comment you made on my blog about meal kits, but I read it. The waste of resources is insane. The plastic and more garbage. That is a huge reason not to use.
ReplyDeleteI am enjoying readjng your blog, Sam. I don't have as much time as I once did to comment a lot, but I do check out all the blogs on my blogroll at least once every two weeks.
DeleteDivorce is a major problem for seniors, and yes, women tend to suffer more financially. Lower earnings during their lifetime and usually having their ex handling most of the money issues leaves them at a serious disadvantage.