News flash: Americans still aren’t saving enough money for retirement.
No doubt you are tired of reading this story. I’m certainly tired of writing it.
“The United States is on the verge of a retirement crisis,” I proclaimed in 2013. I repeated myself in 2014. And again in 2015. And, now, 2016.
This year’s occasion for despair comes courtesy of the left-leaning Economic Policy Institute, which released a report Thursday titled “The State of American Retirement: How 401(ks) Have failed Most American Workers.” According to EPI’s analysis of the Survey of Consumer Finances between 2000 and 2013, slightly less than one-half of prime working-age families (that’s families headed up by someone between the ages of 32 and 61) have a grand total of bubkes in their retirement accounts. (I use the Yiddish only because no other language can quite transmit the absurd awfulness of this fact.)
The numbers get worse and worse. The median family in this age range holds $5,000 in its retirement accounts. While slightly less than two-thirds of white families have managed to put something away for their post-work lives, only 41 percent of black families and barely one-quarter of Latino families can say the same. A lot of people still don’t seem to think they can afford to save money for retirement at all, or they can’t figure out how to do it: Even as expert after expert stresses the importance of saving for retirement, the percentage of prime-working-age families putting money aside in any type of retirement plan fell from 60 percent in 2000 to 53 percent in 2013. For almost every age cohort, the median amount invested in retirement plans was lower in 2013 than prior to the start of the Great Recession.
Moreover, our do-it-yourself, post-pension retirement model benefits those who need help the least the most. Seventy-six percent of families headed by someone with a college degree put something aside for retirement, while only 43 percent of those where the head of the household only graduated from high school managed to do the same. One percenters of prime working age have, on average, more than $1 million saved in their tax-advantaged savings account for their golden years. “We’re moving toward a retirement system that magnifies inequality, and doesn’t reduce it,” says Monique Morrissey, the author of the EPI report.
The EPI analysis landed just two days after the National Institute on Retirement Security, a left-leaning advocacy group, put out its own report, this one based on 2012 Census Bureau data. It that found women are 80 percent more likely to live in poverty in retirement than their male peers. The only bit of good news was that women are now as likely as men to receive access to and invest in a retirement plan at work. But even that came with a black lining—less than one-half of men and women even received such a benefit.
And so once again, it seems we’re in a mess of trouble—and we know it. A recent survey by employer consultant Willis Towers Watson of almost 5,100 employed Americans found that 76 percent of them said they believed they would fare “much worse” in retirement than their moms and dads. Not just worse, mind you. Much worse. Almost one-third think they will run out of money within 15 years of leaving the workforce.
Which makes this an issue you’d expect both parties’ presidential candidates to be stumping about, right?
On the left, Bernie Sanders champions an expansion in Social Security benefits, financed by lifting the payroll tax cap on income greater than $250,000, while Hillary Clinton supports instituting a caregiver credit and recalculating the method used to determine survivor benefits.
Even more notably, the issue is getting some attention in the Republican primary, most prominently from Donald Trump. While now-former candidates like Jeb Bush and Chris Christie talked tough on Social Security. Trump has proclaimed his support for the program. “I would argue that part of Trump’s popularity is that he’s not gone negative on it,” says Morrissey. “Most of his appeal is not about policy, it’s personality-driven, but to the extent it reflects what he stands for, he’s been very coherent on Social Security, recognizing that people feel these are earned benefits and it is deeply unpopular to cut them.”
But let’s not get too optimistic. Social Security is, after all, only one piece of the retirement puzzle—it only replaces, on average, about 40 percent of pre-retirement income. Other talk about how to boost savings gets no love. Marco Rubio, for instance, will not even discuss his own 2014 suggestion to open up the federal government’s defined contribution plan to Americans who lack a workplace retirement plan of their own. When Oregon Sen. Jeff Merkley introduced similar legislation earlier this winter, it got barely a media mention.
For many of us, retirement is a distant destination. Something will always feel more pressing in our lives. Quick—would you save for a retirement that’s 20 or 30 years off, or child care payments that are due this week? “Other policy fights might seem more important, like programs that have a more immediate impact on people’s lives,” explains Christian Weller, a senior fellow at the Center for American Progress, USA and author of the recent book Retirement on the Rocks.
Moreover, not everyone feels the retirement blues, which helps explain why the issue is a perennial, but rarely a main attraction. Our retirement system works fairly well for the wealthiest. “The growth in retirement inequality has not been random—the rich have gotten richer and the poor poorer,” the EPI mourns in its report.
Meanwhile, the financial-services industry likes things they way they are. It’s been a seven-year battle—one that’s not even over—to extend the fiduciary standard (the requirement that a financial adviser act in his or her customers’ best interests) to cover individual retirement accounts, something the Obama administration believes is costing Americans up to $17 billion annually.
And no surprise, the Investment Company Institute, the Washington-based lobbying arm of the mutual fund industry, likes to claim most of us are going to be just fine in retirement—a claim so ludicrous that even a number of financial services companies don’t seem to believe it. Earlier this winter, Fidelity Investments released a press release headlined, “More than half of Americans at risk of not covering essential expenses in retirement.”
Finally, this is the season of sloganeering. People are seeking simple, easy-to-understand answers to longstanding political and economic questions. (Immigrants? Deport ’em! College? Make it free!) Plans to expand Social Security or at least not trim it back (See Donald Trump: “We’re not going to cut your Social Security”) appeal in this environment—but actually making it happen is something else entirely.
Because actually increasing our retirement savings gets really complicated really fast. Not only do we need to determine what to do, but we need to confront both the financial services sector, which views retirement not as a collective social responsibility but as a moneymaking opportunity, and the wealthiest members of our society, who might well need to pay higher taxes and give up tax breaks so we can increase Social Security benefits. “It’s anxiety-producing,” Morrissey says. “People want a solution, but they don’t see an imminent solution.”
No wonder we keep hearing about the retirement crisis over and over again. I’ll see you in 2017, when I’m writing this column once again.