Right now, it’s tough for people who are close to retiring. Many people are struggling to gather enough money to cover their expenses in their 60s, 70s, and later years. In recent years, older folks have been facing tough times. They have been struggling with low incomes in retirement. Some of them have to keep working just to get by. This insight comes from Teresa Ghilarducci, who studies jobs and money at the New School for Social Research.
The Retirement Book
Teresa Ghilarducci wrote a book called “Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy.” The book digs into these retirement issues.
Source: Vette/Pinterest
The idea that older workers are all happy and healthy isn’t true. Many older Americans have to keep working just to get by. Almost half of families in the US don’t have any money saved up for when they retire. This is a big problem for both people and the economy.
Retirement: Teresa’s View
The following are some edited excerpts of what she said about why the US retirement system is messed up.
Source: Forbes/Pinterest
Teresa was asked to discuss how it is that she looks at the world from the bottom up. She replied, saying I believe it’s because of my upbringing. I was raised by a single mom who worked hard while I was growing up. My family was in the working class, and we worried about our financial stability. From there, we started thinking about what we would do when we stopped working.
How is America’s Retirement System Broken?
The way Americans have been handling their retirement savings for the past 40 years isn’t working out well.
Source: WisdomCircle/Pinterest
The typical amount of money saved up in a retirement account for people aged 55 to 64 is only $15,000. But to live comfortably after retiring, the average worker actually needs more. They need about $600,000 on top of what they’ll get from Social Security.
A Breakdown
Half of the population doesn’t have any retirement savings, but they’ll need around $300,000.
Source: DollyQuast/Pinterest
The following 40% have about $60,000 saved up, but they’ll actually need $600,000. And even the top 10% who are better off financially will still need more. They need at least $1 million, but they only have around $200,000 saved.
A Do-It-Yourself Approach
There is a do-it-yourself approach. This approach lets employees and their employers choose if they want a retirement plan at work. The employer can offer a 401(k), but it’s the employee’s call whether they join it or not.
Source: Yurfacecompany/Pinterest
In this situation, the person doing the work gets to call all the shots. That also means they take on all the risk. If they haven’t put in enough effort, or if the financial markets don’t give them the returns they were hoping for, it’s all on them.
Expectations
The problem with the system is that it expects a lot from young adults. It expects 25-year-olds to save a chunk of their paycheck, about 7.6%, every time they get paid.
Source: Spcolibrarydist/Pinterest
The system expects them to keep doing this for 42 years. They’re also supposed to invest that money perfectly and then know precisely how to use it when they retire. But let’s be real, that’s a tough task for anyone.
Should People Work As Long As They Can?
Teresa was asked to discuss why she disagrees with working for a few more years. She replied, saying, “Today, instead of relying solely on pensions, people are depending more on their jobs for financial security.
Source: WiseBread/Pinterest
The idea is that if they work a bit longer, they’ll have more time. They won’t need to use up all their 401(k) savings right away. They can also delay taking Social Security benefits.”
Extra Retirement Benefits
“The truth is that many lower-income or middle-class individuals tend to start claiming their Social Security benefits. They do this as soon as they turn 62. They might not even have much extra income to save from their jobs.” Teresa Ghilarducci further explained.
Source: Erinmckay/Pinterest
“Many older folks don’t have a pension plan. Only a small fraction of Americans can hold off on retiring until they’re 70 to earn extra retirement benefits.”
Insufficient or Unreliable Retirement Funds
“Not many folks in their late 60s and 70s keep working just for fun. Most do it because their retirement money isn’t enough or reliable. So, policies should focus on helping them. We shouldn’t get too excited about older people working,” Teresa said.
Source: CreativeMarket/Pinterest
Working for a longer time might seem like it makes retirement cheaper. However, it looks that way only because you’ll have less time to enjoy retirement. It’s a bit like saying you can save money on lunch by not eating it at all.
Choice to Work
I disagree with the notion that individuals should work more to compensate for insufficient pensions. Everyone should have the option to work if they choose to, but the quality of the work matters. Working out of necessity can result in lower pay. It can lead to diminished dignity compared to having a secure backup plan.
Source: CharlesSchwab/Pinterest
When she was asked if there was more to this issue from an economic standpoint, Theresa replied. She said, “ Encouraging older folks without pensions to find jobs and take whatever they can get gives bosses more control.”
Consequences of Lack of Solid Retirement Plans
When seniors don’t have solid retirement plans, they struggle to negotiate good job deals. Weak pensions make it harder to demand better pay and conditions.
Source: TheMotleyFool/Pinterest
If older folks don’t have solid retirement savings, it’s harder for them to negotiate for better jobs or pay. Weak retirement plans mean less say in job deals, which gives employers less reason to offer good hours, pay, or working conditions.
Teresa: Class Really Matters
Teresa mentioned in her book that class really matters in this retirement situation. Her Interviewer, Kerry Hannon, asked her to explain what she meant.
Source: DailyMail/Pinterest
Teresa said, “When we check out how retired folks are faring overall, it doesn’t really show us what we need to see. It doesn’t show us the true picture of how secure American retirement incomes are.”
The Top Ten Percent
“The average wealth is mainly boosted by the top 10% who have done really well in our system. They’ve consistently kept their money in their accounts, received good contributions from their employers, and benefited from maximum tax breaks.
Source: Freepik/Pinterest
They managed to hold onto their money during stock market lows and invested when prices were down. They also never stopped working, so they didn’t need to withdraw money from their accounts.”
Different People and Their Retirement Plans
Many people have saved $1 million to $3 million for retirement and are doing well.
Source: ExpansiónMx/Pinterest
However, for every person like that, there are hundreds who had a 401(k) retirement plan. But these people had to use up all the money in their plan. Some don’t have much saved at all. Others never had a retirement plan because they worked gigs or in jobs where employers didn’t offer 401(k)s.
Why Is There Shame About Retirement?
In some parts of our society, people feel happy about working hard and then enjoying retirement. But for many of us, not having a job makes us feel bad. This affects how Americans think about retirement because staying busy all the time is seen as normal.
Source: MarketingProfs/Pinterest
If you can’t afford to retire, you might feel ashamed. This can lead to depression and inaction. This can make things worse because Americans don’t vote with enough anger and urgency to change things.
Gray-New Deal
When Teresa was asked to explain the “Gray-New Deal” she mentioned in her book, she gave this explanation. Many of us overlook how involved the government is in our finances. It’s essential to back plans to make Medicare cover hearing aids, vision, and long-term care and to ensure that more money is put into Social Security.
Source: TheMotleyFool/Pinterest
Teresa said her Gray New Deal has three elements. She said, “We need to make sure Social Security stays strong. Instead of thinking about cutting it, we should find ways to bring in more money for it.
Second and Third Elements
The second thing is to ensure that everyone has access to a genuine retirement plan. A plan where people cannot easily withdraw money. Additionally, we should automatically enroll people into these plans.
Source: AhujaConstructions/Pinterest
The third one is to make sure healthcare and long-term care costs are covered. We can achieve this by expanding Medicare and lowering the age at which people can enroll to 55 or 60.
Other Policy Shifts That Could Help Those Who Need Money To Continue Work
When people between 55 and 60 have their healthcare and long-term care costs covered, it would be easier. It would make healthcare more affordable for older workers. It would also make it cheaper for employers to hire them if Medicare covers their insurance.
Source: AARP/Pinterest
Raising the minimum wage could mean older workers in jobs like fast food, retail, and caregiving get paid more. Having more unions could also make these jobs better. If we work hard to stop age discrimination, older workers can negotiate for better pay and conditions.
More Policy Shifts That Can Help
It’s essential to create an Older Workers Bureau at the Department of Labor. This bureau would make rules and plans to help older workers have better jobs. It would also help them have more chances for good jobs, not just anyone.
Source: Cheapism.com/Pinterest
Economists think the US will add over 6 million jobs by 2026. Many of these will go to people over 55; that’s a significant number of older workers.