A new report by the Employee Benefit Research Institute suggests that many Americans will have a pretty brief retirement since they will have to work beyond the average life expectancy of a citizen before they can afford to retire. The report entitled “The Impact of Deferring Retirement Age on Retirement Income Adequacy,” says that a large percentage of Americans will have to work into their 70s and 80s to afford basis costs of living.
For those Americans earning between $11,700 and $31,200, they will need to work till age 76 to have a 50% chance of covering basic expenses in retirement. Those citizens earning between $31,200 and $72,500 will need to work to age 72. You have highest income quartile (making more than $72,500), you can still retire at 65.
The AARP Public Policy Institute report, “Family Income Sources for Older People, 2009″ notes the growing importance on earnings to support older Americans:
The share of aggregate family earnings income increased steadily, from 26.4 percent of total family income in 1990 to 35.0 percent of total family income in 2009 (an increase of
9.2 percentage points or 34.8 percent). This change indicates that the earnings are becoming a more important income source for older persons’ families.
In the meantime, despite reports that the $61 trillion U.S. debt amounts to to $534,000 per household, the Obama Administration will spend $750 million on just our latest war in Libya.
Here is the EGRI report: EBRI_IB_06-2011_No358_Defr-Ret
Here is the AARP report: fs224-economic
Source: MarketWatch
Jonathan Turley
Tony writes:
The $61T in unfunded liabilities ($14T today is outright debt, the balance are promises we made that there will be no income for… future debt in other words), only includes federal spending. To capture the full debt picture state obligations have to be put on top of it. As I’ve previously written, the total government debt and unfunded liabilities are probably about $100 trillion. That’s more than $1.1 million per taxpaying household.
As for debt service, it is true that government borrowing costs are low today. However, as creditors expect the real value of dollars to decline with inflation of the money supply rates could rise to levels similar to we see in Europe, where some governments pay north of 7 and 8% to borrow. In such a scenario about 50% of federal revenue would be consumed with debt service alone. That day is coming.
I’ve predicted what government will do in an attempt to delay the day of reckoning as long as possible, up to and including global plunder by the US empire.
OS,
A lot of people just don’t understand that most poor people aren’t poor by choice. They are often poor from lack of opportunity, lack of education and sometimes just plain old fashioned bad luck. Many if not most working poor work much harder than the average executive and at jobs that actually accomplish something other than self-aggrandizement. None of which makes them any less human or less equal to the rest of the species because they can’t “live in the middle of one of the wealthiest communities in the country”. 🙄
BiL, he better be careful about Karma. I hear it can be pretty hard on the smug and self-righteous. I know that in the area where you live, you are well aware that many families cannot afford a can of bug spray, even though their babies have cockroaches crawling on them in their cribs. And that baby formula gets extra diluted with water to make it last longer. Formula they get at the discount “no label” store. You know exactly what the problem is, while the clueless continue to have no clue.
He’ll probably suggest the Purina Retirement Account.
As in the poor should be turned in to dog food.
Roco, there is absolutely nothing keeping you from investing your money. How do you propose the person who has no job, or tries to support a family on minimum wage would do it. My daughter has a widowed neighbor who saves her money so that about once or twice a summer she can buy a bell pepper, which she loves. This lady buys her eggs one at a time. She plants a tiny garden so she can grow some tomatoes and a few other vegetables. She has a dollar or two discretionary cash left after paying her bills. She does not have a telephone or a television because she cannot afford these luxuries.
If you were helping her with her investments, where do you suggest she start?
I live in Appalachia, and this is not a unique story. If it were not for the famous Santa Train in winter, many hundreds of children would get no toys or candy at Christmas. So what investments do you suggest for a retirement fund for these folks?
Roco,
The people who retired just before the 2007 and 2008 crash would not have been better without Social Security. If you want to play the market, you can do that with your Roth and Regular IRA funds.
Mike Spindell:
I am merely suggesting an alternative and if Frank had managed his own retirement plan he would not have been fucked.
If you had put the money aside which they take from you to fund social security you would be better off.
You need to reread what I wrote. I also used a very modest example of income and what it can do for you. I think quite a few people make around $30,000 per year and what I posted is in reality doable if people had the right to invest their own money in their own retirement plan.
I am one of the. I worked 20 years for the same company when it went deep into a hole. They stole the pension funds to pay off Marvin Rainwater & the Board of Directors. What I got was $18,000, which I can’t have until I turn 65, that they pay the Federal minimum rate on (ave about 2-3% per year). While I enjoyed great gains in my 401k during the 90s the last 10 years have been pretty much flat.
If they fuck with Medicare or Social Security I will never retire, if they don’t I might be able to retire at 80.
If republicans get their way with medicare healthy living after the age of 65 will be a nostalgic tale from our past.
Tony C.
Did you read the article to which Prof T. linked?
Dear Roco,
I completely supported myself since I was 18. Worked my ass off, sometimes with two jobs. I had to retire due to illness. I don’t give a damn about your figures because I never had enough money to invest. Were it not for my pension, social security and medicare I wouldn’t be writing this right now, I’d be dead. I don’t know what work you do, or what kind of life you’ve led, but I do know what I’ve accomplished and I can tell you I have as much right to be alive as you. Unfortunately, you have lost your empathy for others, to an empty philosophy and inordinate greed. You pontificate, yet you know, or have conveniently forgotten everything about they way most of us live. Take comfort in your smug selfishness, the payback for hubris though is a bitch.
here is the link for the market information above:
http://observationsandnotes.blogspot.com/2009/03/average-annual-stock-market-return.html
J Smith:
if you start work at 18 and work 30 years you can retire at around 50 or maybe 60 depending on how well you do in putting money away.
What really needs to happen is to make SS private and have a safety net for the few people who do end up destitute and needing state assistance.
People are more than capable of looking after their own retirement if given the chance. The math indicates they would be far better off and have to work less.
Of course that level of freedom requires knowledge to avoid being screwed.
I wouldn’t worry about it – they wont live long enough. And that’s whole the idea isnt it?
lets do some math. a person working for 30 years and making 31,000/year pays about 15% of his possible income to SS and medicare. The employee pays 7.5% and the employer pays 7.5%.
So 15% of income is 1.075(31,000) [makes the valid assumption that employer would pay more if he did not have to pay 7.5% to feds] = $4,998.7/year. Without interest that is about $150,000 over 30 years.
At 3% interest = $243,000 (assuming $100 in your retirement account)
At 5% = $347,000
At 8% = $622.000
At 10% = $943,000
At 12% = $1,459,000
Average Stock Market Return per year: Last 5, 10, 20 … Years
Since 1900 (end-of-year 1899), through 2010, the average total return/year of the DJIA (Dow Jones Industrial Average) was approximately 9.4% — 4.8% in price appreciation, plus approx 4.7% in dividends. (Some numbers won’t add up due to rounding.)
Since 1929 (End-of-year 1928 — i.e., before the crash), thru 2010, the return was 8.8% (4.6%, plus 4.3%)
Since end-of-year 1932 (i.e., after the crash): 11.2% (7.0%, plus 4.2%)
The average annual stock market return for the past twenty-five calendar years, was 11.2% (8.4%, plus 2.8%)
Stock market returns for the last 20 years: 10.2% (7.7%, plus 2.5%) [see below for additional 20-year periods]
Returns for the last 10 years, 3.1% (0.7%, plus 2.4%) [see below for additional 10-year periods]
For the last 5 years, 4.2% (1.6%, plus 2.7%)
For 2010 the stock market (Dow/DJIA) total return was 13.8% (11.0% plus 2.8%)
2010 year-end dividend yield was 2.5%
lets be conservative and say 8%. So at year 30 a person could retire with $622,000 and could make lets say 4% per year in a safe investment. They could not touch their principle and have $24,880/year to live on. About $10,000 less than they made working and about $12,000 more than they would have if SS was all they had to rely on.
It would seem to me SS is making our seniors poor and extending the amount of time they need to work. Now you may end up retiring during a downturn and might have to extend your retirment date because of that.
>anon nurse
We need Rick Perry like we need to spend another $750 million fighting a war in Lybia.
>> $61 Trillion in US Debt…
Our debt is $14T, not $61T, and with about 110M households, that is $127K per household. The interest rate on the debt is currently around 1%, which means the typical household’s annual income taxes (on a typical household income of $50K) have $1,270 devoted to debt service (for the entire year).
I do not defend an illegal and Unconstitutional war, I do not want us to be in Libya, but this is an idiotic argument against it: spending $750M is about $6.82 per household, which is a trivial amount. I’d rather we did not choose whether or not to obey the Constitution based on whether or not it is cost-effective to do so.
Discussions of debt and government spending are pretty meaningless when phrased in terms of millions, billions and trillions; these are scare words for the innumerate. They must be put in terms of the median household expense to make any sense to the vast majority of people.
http://www.alternet.org/story/151209/the_gop%27s_cia_playbook%3A_destabilize_country_to_sweep_back_into_power?page=entire
Swarthmore mom,
Thanks for the link. We need Rick Perry like we need…. (open for suggestions…)
http://www.foxnews.com/politics/2011/06/10/perry-very-likely-to-run/ Is it time to get rid of Obama and put another Texan in the white house? This Texan’s budget cuts are much more draconian than Bush’s were and he likes to privatize everything. He is also much worse on women’s issues as he does not have the influence of Laura. He likes to overuse the death penalty, too.
I’d willingly work to 120 if it meant that I would out live every banker, republican and blue dog democrat today.