THINK


TANK An Occasional Series


Retirement Out of Reach for Many


Working Americans


Seniors need mandatory, guaranteed pension plans to avoid falling into poverty.


by teresa ghilarducci A


THE ISSUE: A MAJORITY OF MIDDLE-CLASS BABY BOOMERS ARE ON TRACK TO EXPERIENCE DOWNWARD MOBILITY IN RETIREMENT INTO POVERTY OR NEAR-POVERTY.


full 25% plan to die in their boots because they can’t afford to stop work- ing.


Two-thirds of those working past


age 62 are doing so because they don’t have enough money to quit. The U.S. reports more than 10% of Americans, aged 65 and over, are poor. The U.S. has the highest rate of


elder poverty among our wealthy peer nations; 23% of U.S. elders are in pov- erty — meaning they live on just 50% of the U.S. median income, $23,200 a year. The Dutch elderly poverty rate is in the single digits.


Teresa Ghilarducci is an economist and nationally recognized expert in older worker labor markets and retirement security. Her


latest book, Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy, unpacks the economic myths about the positive effects on health, wealth, and productivity of working longer.


34 NEWSMAX | OCTOBER 2024


HOW WE GOT HERE The newest Federal Reserve wealth data reveals the middle 70% of older American households have about $86,000 in their retirement accounts and about $89,700 in debt. The seeds of the crisis started


over 40 years when Social Security benefits were cut, wages fell or stag- nated (especially for men without advanced degrees), corporate norms and unions weakened, and employ- ers stopped sponsoring retirement plans and froze expanding coverage. Only half of workers had a retire-


ment plan at work in 1980, and still only half of workers save for retire- ment in workplace savings plans in 2024.


The minority of employers who sponsored a retirement plan felt pres- sure to shift to 401(k) type plans from defined benefit (DB) pension plans, which allow no withdrawals, earn the highest rates of return, are man- datory, and provide a stable income for life. In 1980, 38% of private sec-


tor workers were covered by a DB plan, and so were most public employees. By 2020, that number had plummeted to just 15%.


D


THE SOLUTION: AMERICANS NEED GUARANTEED RETIREMENT ACCOUNTS.


efined contribution (dc) plans, such as 401(k)s, shift many risks from employer to employee. In contrast to


DBs, in DCs workers must opt to save, choose the right level of contribution, construct a portfolio, resist spending down their account, and learn how to manage a lump sum for life. Many, not surprisingly, were ill-


prepared for the task. And even the employee who plans carefully, is fully financially literate, and saves enough faces financial risk in old age because, for most Ameri- cans, retirement starts before they planned. Over 52% of retirees say they retired before they wanted to. Andrew Biggs, a scholar at the American Enterprise Institute, dis- putes we have a problem. Most people, he says, are covered by Social Security, can work longer, and average retire- ment savings have increased over time.


But averages and medians


tell different stories. Aver- ages are heavily influenced by the wealth for the top 10% of earners, resulting in


N UNIVERSE/SHUTTERSTOCK


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