In the Wall Street Journal today, Andy Biggs takes issue with a recent GAO report that says retirement savings are in trouble, especially for low-income workers:
Among all households of workers 51 to 64 earning more than $20,000 in 2019, 80% either have a retirement account or are entitled to traditional pension benefits. Even among households with total earnings between $20,000 and $40,000, 49% have a formal retirement plan. Simply adopting reasonable parameters multiplies the report’s headline finding fivefold.
Does 49% seem low? It shouldn't. Most people with low to moderate incomes will have nearly their entire incomes replaced by Social Security alone. They don't necessarily need retirement accounts.
On the more general question of how we're all doing on retirement, the answer is: it depends. I was curious, so I took a look at the latest assessment from MINT, the Social Security Administration's tool for projecting retirement income into the future. Here's the latest from MINT8:
MINT8 projects that the average retiree income today is about 100% of the average wage. Fifty years from now it will be only 75%.
However, SSA projects that average wages will increase even accounting for inflation. This means that the average retiree today earns $63,000 while the average retiree in 2071 will earn the equivalent of $84,000.
So is this good news or bad news? You can cherry pick either of these to make whatever point you want. But they're both true.
"Most people with low to moderate incomes will have nearly their entire incomes replaced by Social Security alone. They don't necessarily need retirement accounts."
If you think people can have any reasonable kind of retirement living on Social Security alone, your attachment to reality is suspect.
But then they can just keep living at the same sub-standard of living that they already were!!!!
Someone earning $50,000 per year over their career earned about $4100/mo.
They will get $1980/mo if they retire at 67. How can they live on this?
Well, the SS benefits are taxed less than the salary was, so there's that, I guess.
But I was really just being sarcastic about how even if the premise were true, how is that a not-bad thing? Regardless of what Atticus says in trollspeak about paupers into princes, he's missing the point. The point is that safety net programs are supposed to keep people from being destitute or impoverished. Simply replacing someone's poverty-level salary with poverty-level retirement benefits solves no problems and creates more problems (i.e., a subpopulation of impoverished and aging people, which is exactly what Social Security was/is supposed to solve).
The goal of retirement funds is to replace the income you were earning. Not to turn paupers into princes.
They're only both "true" because SSA is attempting to project inflation and wage growth 50 years into the future. IOW, it's only "true" because it's what the SSA report says.
Couldn't figure out how wages were counted, i.e. whether wages included contributions to 401K's, etc., which are pre-tax, or not.
Don't worry Gen X, Millenials, and Gen Z'ers, everything is going to be just fine. The planet isn't on fire and getting hotter every minute, and we're just going to keep burning down as much as possible so the rich can add a zero to the money they're never going to spend.
I'm guessing Kevin isn't going to have to rely on social security for his retirement.
Kevin should group these pieces into a "this is fine" moniker, with the meme picture at the top. But funny enough, he probably really does believe everything is just fine. It probably looks that way when you have zero real debt and at least six zeroes in your retirement account.
👍👍👍👍👍
I will day that Gen x and some Millennials get inherit a fair amount of money from their Boomer parents. Our kids will get a tidy sum when we kick the bucket.
Why oh why did I not proofread this while I had 5 minutes to fix it.
Meh, whatever inheritance the average X/Y/Z gets might help pay down some the debts they've accrued.
There isn't going to be some windfall, and again, the fact that society is collapsing as we speak makes it all pretty irrelevant anyway.
Oh well, "this is fine".
According to US News the average SS payment this year is $1,827/month or $21924/yr. It's generally the people who may get less than that from SS who have no other retirement since their income has always been low. A lot of people will have to get by on meager SS payments.
This subject is a lot more complicated that what Kevin can cover or what you will get from the WSJ. Average total retirement income is probably very misleading - some people get an enormous amount in retirement while many get very little. To understand what is going on it is probably necessary to break things down into income quintiles or deciles.