By Robby Stern
I had already begun writing this column discussing the May, 2015, report issued by the U.S. Government Accountability Office (GAO) entitled “Retirement Security: Most Households Approaching Retirement Have Low Savings,” when a front page New York Times (NYT) article entitled “U.S. Seniors Prosper, Finding ‘Sweet Spot’ in Middle Class” appeared. The Seattle Times ran the NYT article with a more modest headline, “Social Security, pensions and investments pay off for seniors.”
What the heck! The NYT’s headline and the GAO report seemed to be directly contradictory. And the NYT article made no reference at all to the May, 2015, GAO report.
The GAO report was requested by Senator Bernie Sanders. The report documented what many strongly suspected. The economic realities of the 21st century and in particular the growing income disparity between the top 2% and the remaining 98% of the population is creating the likelihood that more and more seniors will be forced to forego retirement, retire later than they had planned and/or spend their senior years in relative poverty.
The 65 and older population will grow over 50% between 2015 and 2030. This demographic group faces growing retirement insecurity for a variety of reasons. The elimination of defined benefit pensions is a big source of retirement insecurity. Corporations and public entities are eliminating the third leg of the three-legged retirement stool while 401(k) accounts are proving to be, at best, inadequate. In addition, low and declining wages make it very difficult to save.
The GAO reports, “About half of households age 55 and older have no retirement savings (such as in a 401(K) plan or an IRA).” It goes on to say, “many older households without retirement savings have few other resources, such as defined benefit (DB) plan or non-retirement savings, to draw on in retirement.”
The report adds, “Among those with some retirement savings, the median amount of those savings is about $104,000 for households age 55-64 and $148,000 for households age 65-74, equivalent to an inflation protected annuity of $310 and $649 per month, respectively. Social Security provides most of the income for more than half of households age 65 and older.” (emphasis mine)
Up steps the NYT reporting that U.S. seniors have found the “Sweet Spot” for retirement security. The age group to which the NYT was referring who “weathered the economic downturn that began in 2007 and made significant gains” are between 65-74. But, according to the GAO report, many if not most of the people in this age group are facing significant financial challenges. For example, 52% of people in this age group have NO retirement savings. While a higher percentage of this group have defined benefit pensions, 27% of people between 65-74 have no retirement savings and no defined benefit pension. Some “sweet spot”!
According to the GAO report, people between 65-74 who have retirement savings have a median savings of $148,000, meaning half have more and half have less. If there is no defined benefit pension, which there is not for a majority of the people even in this age group, they are having to live on Social Security and whatever they have been able to save.
More older people are working to supplement their income, and in most cases not because they want to, but because they have to. According to the NYT, the number of older people working has increased from one in five in the late 1990s to one in three.
The NYT article quoted Alice Munnell, director of the Center for Retirement Research at Boston College who stated, “It is not so much that older people are experiencing unseemly gains in income. It’s more that middle-aged people are not seeing incomes growing or even keeping pace with inflation.”
The NYT article reports that the middle class is now made up of more seniors than ever. Middle class is defined as people between 40% and 80% on the income distribution scale. The economic context is the overall stagnation or decline in income for all distributions along the income scale with the exception of the top 10%. Even within the top 10%, almost all the gains have gone to the top 2%. After juxtaposing the GAO study with the NYT article and particularly with the headline “U.S. Seniors Prosper, Finding ‘Sweet Spot’ in Middle Class,” it strikes me that the NYT’s front page article really missed the point. Retirement insecurity is growing. The loss of defined benefit pensions, and declining incomes and pensions for a large majority of the people have created the threat that many, if not most, seniors now and in the future face relative poverty (with Social Security creating the floor) as they look forward to their senior years.
PSARA and organizations like PSARA are on the leading edge of fighting back. We will take every opportunity we can, including the upcoming anniversaries on August 8, to build the movement for retirement security and against those who are threatening to cut Social Security and Medicare. (Shame on our U.S. Senators and those U.S. Representatives from Washington who voted to cut Medicare in the recent Fast Track debate!). We demand the enrichment and expansion of Medicare and Social Security and significant equitable redistribution of income and wealth.