America’s retirement and elder poverty crisis is painful, frightful, and undeniable—yet some so-called experts want us to believe there’s nothing to fret about. The numbers, however, tell a different story.
Nearly half (44%) of all American households with members aged 55-64 have no savings at all and will have to rely entirely on Social Security. Census data cited in Senator Bernie Sanders’ report on retirement shows roughly 52 percent of Americans 65 and older live on less than $30,000 annually, and one in four survive on less than $15,000 per year. Nearly 17 million older Americans aged 65 and up are financially insecure, living below 200% of the poverty line, with more than 10 percent in poverty.
Workers do not have good ways to save for retirement, with 57 million Americans lacking a simple way to save from their regular paychecks. Another reason seniors are struggling is the shift in many industries from defined benefit plans to defined contribution plans. The Congressional Budget Office (CBO) cites the move as the cause of a 20% difference in the rise of wealth inequality from 1989 to 2019.
In 1975, more than 27.2 million workers participated in defined benefit plans, compared to 11.2 million in defined contribution plans. By 2019, 85.5 million workers participated in defined contribution plans, while only 12.6 million were in defined benefit plans. By 1983, 31% of Americans would be unable to keep their current standard of living in old age. By 2022, this figure had increased to 39%.
Relying on people working longer to avoid the crisis ignores the realities of age discrimination, economic dislocation, and skills obsolescence, all of which can prevent older Americans from finding decent work when needed. Many retire before they want or are ready to due to layoffs and poor health. Research shows that nearly half of middle-class workers nearing retirement will become downwardly mobile and move into poverty or near poverty, indicating that many middle-class workers have a good chance of becoming poor elders.
A Federal Reserve survey indicates most people are not ready for retirement. When asked, “Do you feel your retirement savings plan is currently on track?” more than half of people aged 55-64 said “no.” When asked, “How much money have you saved for retirement?” 45% reported having less than $100,000, while 28% had more than half a million dollars; it’s a tale of two retirements. The National Institute on Retirement Security states that 79 percent of Americans agree there is a retirement crisis, up from 67 percent in 2020, with more than half concerned they cannot achieve financial security in retirement.
Despite these figures, some experts insist there is no retirement income crisis. Andrew Biggs, senior fellow with the American Enterprise Institute, accused Senator Sanders of misrepresenting the crisis by using misleading numbers. Biggs claims that among 55 to 64-year-olds in 2022, 58 percent reported having retirement savings in a taxable investment or savings account, 14 percent owned real estate, and 19 percent owned a small business that could generate retirement income.
However, 2022 Federal Reserve data indicates that only 9% of Americans aged 55-64 answered “yes” to whether they had a business or some real estate that would provide income in retirement. Most of these assets are owned by the top 10%, while those in the bottom 90% have minimal if any, assets for retirement.
Biggs’s report regarding the average values of people’s assets is deceptive because it can be skewed by a few wealthy individuals. The typical American nearing retirement has insignificant wealth in checking accounts, business equity, or real estate. The 2022 Federal Reserve Survey of Consumer Finance shows that in the bottom 50% of the wealth distribution, people nearing retirement have $56,000 in housing equity and $0 in business assets. The middle class, which represents the next 40 percent of households, has $0 in business wealth and $315,000 in home equity. If the home equity were to be converted to cash through a sale, it would generate approximately $1900 per month, which is insufficient for a comfortable retirement.
The U.S. has sky-high elder poverty rates that won’t get better unless Congress acts. The elder poverty rate has remained around 10 percent over the past 30 years, rising from 8.9 to 10.2 percent from 2020 to 2022. The U.S. has the highest elder poverty rate among the world’s wealthiest nations by far. Addressing these facts and finding solutions is crucial.
Attempting to undermine these solutions only exacerbates America’s retirement and elder poverty crisis. In a recent Senate hearing, Sanders questioned why one of the wealthiest countries in the world has some of the poorest seniors. Answering this vital question will help create a more secure, sustainable, and dignified future for America’s growing elderly population, who have earned at least that after a lifetime of hard work.
