Retirement is the final
chapter of the American dream. But the dream of the
golden years is quickly turning into a fairy tale. Retiring in America today is
not easy. It is a very tall mountain
to climb. More than a third of
Americans today feel unprepared or unsure if
they're on track for retirement. And nearly a
third of seniors say they either plan to work through
the age of 70 or never retire in their lives. I'm not want to be rich. I just like to have enough
to where I could be comfortable. The pandemic, a war in
Europe, rate hikes, as well as fears of a recession,
have also led to great turmoil in the market,
wiping out an estimated $3.4 trillion from retirement
accounts during the first half of 2022. The United States is
definitely facing a retirement crisis. If we don't do anything
about it, years down the line, you're going to wind
up with a lot more seniors in poverty, reliance on
public services. Others say the retirement
crisis in America is a myth. The US retirement system is
stronger than it's ever been. Retirement incomes
have never been higher. Retirement savings have
never been higher. Participation in retirement
plans has never been higher. All the things we would
like our retirement system to be doing it is doing. So is America facing a
retirement crisis? And if so, can it be
stopped? My name is Juanita Dykes. I live in Rural Retreat,
Virginia. I've been retired for six
years now. I've had a number of jobs. I've worked in factories
all my life. Unfortunately, I didn't
listen to people telling me that I needed to save for
retirement. I thought I would get paid
by the government. You'll have enough to live
on. Wrong, you don't. I get $1,574 from Social
Security. I get $631 from my pension. You pay all your bills, car
payment, all your utilities, all your insurance, all
that together. It just don't add up. Americans aren't saving
enough for retirement. I don't have no savings. I'm probably in the red at
the bank for you. You write a check and you
don't have nothing to cover it. Then when you get your
next check, all that extra money comes out. The median retirement
account balance for those approaching retirement sat
at $89,716 in 2022. That translates to less
than $500 per month over a 15-year retirement span. Baby boomers, they were well
into their mid-forties before 401(k)s came along
and they had the opportunity to saved When they entered
the workforce, the assumption was social
security and traditional pensions. Now that they're
reaching retirement, the ground rules have changed
and the expectations are that they would have saved
more along the way. The last place I worked was
just like a factory job. And you got paid, that's
it. No extra nothing or
nothing. We didn't have paid
holidays. You didn't have vacation. You didn't have nothing. You
just worked. The other problem is that
during times of economic crisis, there's a lot of
leakage out of retirement savings plans. Whereas things like pensions
and social security, they are lockbox. You don't
touch that money no matter what. That is there for
your future. IRAs and 401(k)s often tend
to get tapped when people run into unemployment or
health issues, medical expenses. In our own research of
retirees, we see that they're doing pretty well. However, they're not
financially in a position to absorb a major financial
shock. And a big example of that
is the high cost of long-term care services and
support. If they have some sort of
cataclysmic health crisis or need that long-term care,
they just don't have the financial resources to be
able to afford it. One in five Americans, aged
65 and older, said they spent more than $2,000 out
of pocket on health care. A separate study found that
more than a third of Americans over 65 are
worried they're unable to afford health care services
within the next 12 months. If you go to a regular
doctor, that's covered. But if you go to a
specialist, that's like $30. I have an appointment this
week with a specialist. I don't have the money to
go, so I'll have to call and cancel that and redo it
some other time. Higher life expectancy also
means that more retirees can outlive their retirement
savings. An analysis by the World
Economic Forum found that men live 8.3 years longer
than their retirement funds can pay for, while women
live 10.9 years longer. Younger generations aren't
faring any better. About 25% of non-retired
adults in America have no retirement savings
whatsoever. A lot of people don't have
access or at least don't have consistent access to
an employer-sponsored retirement plan. And we know
from the behavioral science research that people don't
walk into a bank and say, I want to open up an IRA. Workers aged 25 to 34 had an
average total saving rate of 10.5%, while workers under
25 had a saving rate of 8%, far from the recommended
total saving rate of 15%. And as we look at the
changing landscape, especially millennials and
Gen Z, they're entering the workforce with student
loans, with a debt that is unprecedented from earlier
generations. Another issue impacting
younger generations is they're going to change
jobs many times over the course of their careers, as
well as spend time in self-employment. So they're
going to have to take a much more hands-on
do-it-yourself approach in managing their savings and
investments and ensuring that they're saving enough
to last their lifetime when they retire. I have considered going back
to work, but I had a knee replacement two years ago
and the other one's trying to tell me it's about time
for it, so I can't stand very long at a time. I won't say that I won't
have to because I might if they don't get this social
security straightened out where we can have enough to
live on. In 2022, the Social Security
Administration estimated that their reserve will
deplete by 2034 unless Congress intervenes,
putting Social Security benefits under threat. Because of demographic
changes during the 70s and 80s, social security built
up a large surplus and is now in the process of
depleting that surplus. Once depleted, retirees will
only receive 78% of their benefits starting then. It's not obviously the end
of the world, and it doesn't mean social security is
bankrupt at all, but it does mean a meaningful reduction
in benefits that's really going to hurt people,
especially at the bottom and even in the middle. Inflation has been the most
disruptive force to retirement. A quarter of
Americans are expected to delay their retirement due
to rising consumer costs. The worker is now the one
that bears the longevity risk and the market risk in
retirement. Market downturns are really
the most problematic for people who are about to
retire because that represents a real loss to
them as opposed to something that they can recover from
over time. $1,000,000 in a retirement
account two years ago is worth about $120,000 less
today when adjusted for inflation. If you're retired and on a
fixed income, inflation really, really, really
hurts. And we've come out of decades of historically low
inflation to all of a sudden pretty substantial
inflation, especially in the things that matter to
people, which is food and fuel. I'm like anybody else. I like a good steak every
now and then. Well, that's just plumb out
of the question because you can't afford to buy that. You just have to buy what
you merely have to have and then hope that you have
enough left to pay your bills. Inflation is higher than
we've seen in a long time. Right now, we don't really
know whether this is we're now in an era of high
inflation or higher inflation or whether it is
a longer tail from the effects of the pandemic. An ongoing retirement crisis
reduces consumption and drains resources which
could be detrimental to the economy as a whole. In terms of people who wind
up falling into economic hardship during
retirement, that is something that a lot of
states have taken very, very seriously, and they're
really concerned about more and more seniors needing
things like food stamps, subsidized housing, which
is already in very low supply, and also Medicaid. A hidden impact that doesn't
get as much discussion is the impact on families. When an aging parent
doesn't have the resources to care for themselves, or
maybe they can't afford long-term care, they turn to
their adult children. As adult children step in to
support them, this detracts from their own ability to
save for retirement. So this could create a
generational, vicious cycle unless we solve for it. But some argue that the
retirement crisis in America is merely a myth. The US retirement system is
strong. The income of the median
retiree, the typical retiree in the United States is at
record levels. It's never been higher. Poverty and old age has
never been lower. The median US retiree has
the highest disposable income in the world,
according to the OECD, 40% higher than Germany, 50%
higher than the Netherlands. U.S. retirees in surveys
are much more likely than European retirees to say
they can maintain their pre-retirement standard of
living. So all the things we want
people to do are going in the right direction. In 2021, nearly eight in ten
retirees were confident they'll have enough money
to live comfortably throughout retirement,
while over seven in ten workers agreed with the
sentiment. Nobody really has the
incentive to tell the truth about the successes of the
US retirement system. Four in five retirees also
reported that their overall lifestyle after retirement
was as expected or better. I think everyone agrees
there are certain people who are falling behind in their
retirement savings. That's true today. It was
true in the past. And the question is, what
do we do about it? The danger of claiming we
have a retirement crisis is we throw the baby out with
the bathwater. We throw out the things
that are working for us and we don't address the
problems that really exist. I think a lot of it is
semantics almost. Most researchers do
understand that there is a substantial portion of the
population that are going to be financially insecure in
retirement. There are some debate about
whether that's, you know, high 30%, 50%, 60%, but
that's not a small portion of the population. Policy will likely play a
pivotal role in improving the state of retirement in
America. Retirement policy is one of
the few things in this country that has a long and
exemplary history of collaboration among both
parties. What we need from a public
policy perspective is a broader collaboration among
industry, among employers,the great minds,
academics, nonprofits and everyday people to step
back and take an even broader look at our
retirement system and address the issues that are
the greatest detractors of retirement security right
now. The Securing a Strong
Retirement Act of 2022 was passed by the House in
response to concerns over retirement security. The act includes many
benefits that could help more Americans save for
retirement, such as automatically enrolling
employees into a retirement plan unless they elect not
to participate. But issues concerning
coverage still need more attention. Almost half of
the employees in the private sector between the age of
18 and 64 aren't provided with options to save for
retirement, and about 65% of employees in companies with
10 to 24 employees lack retirement plans. Improving retirement plan
coverage, meaning ensuring that all workers have the
ability to save for retirement in the workplace
is paramount to increasing retirement security in the
U.S. We need to have a
retirement system that is fully inclusive so that
people have the opportunity to save, invest and grow
their savings over their lifetime. Ultimately, retirement
security today rests in the hands of future retirees. Tip number one, avoid
getting overwhelmed. Getting overwhelmed can
lead to procrastination, and it can lead to inaction,
which is counterproductive. Another is create a
retirement strategy. Even have some fun with it. Envision what you would
like your life to be like in the near future, or if
you're younger, far away into the future, and then
put some numbers by it. Start building a plan. Seek help if you need it. There are financial
professionals available to help you with that. You have to engage. You have to learn as much
as possible. So it's up to you to know
enough to ask good questions and make informed
decisions. It's your retirement. You need to save. I know when you're young,
you think, I don't need to save, I'll do that next
time, we'll do this whenever . Do it now because I'm
telling you, you need to. If you plan on living any
length of time, you need the extra money.
