The persistent myth of the wealthy retiree took a hit recently when the Schwartz Center for Economic Policy Analysis (SCEPA) published a report predicting that 40% of older workers and their spouses will experience downward mobility in retirement.
SCEPA estimates the average older worker has only $15,000 saved for retirement.
An estimated 2.6 million middle class workers who retire at age 62, which is the most common age for retirement, will actually fall below the poverty level – $11,670 for an individual and $15,730 for a two-person household.
About 5.9 million will teeter into near poverty, which is 200% percent of the federal poverty level. They will have an annual income of $23,340 for singles and $31,260 for couples.
So why don’t these folks just keep working? According to SCEPA, many older workers are unable to delay retirement due to poor health and the inability to withstand the physical demands of work. Others have difficulty finding jobs with decent pay. Some workers who must keep working into old age may die before they can retire.
The solution, SCEPA says, is to strengthen Social Security and create Guaranteed Retirement Accounts.
Guarantee Retirement Accounts should include:
- Mandated employer and employee contributions of 1.5 each.
- Professionally managed individual accounts in pooled and diversified funds.
- Tax credit refunds to help low-income earners.
- Lifetime annuitized payouts.
SCEPA does not go into why a decent retirement is unattainable for so many Americans but others blame the appalling lack of foresight by the U.S. Congress, which has allowed defined benefit pensions to virtually disappear in the private sector (while insuring their own comfortable retirements).
The study was conducted by Teresa Ghilarducci, Bernard L. and Irene Schwartz Professor of Economics at The New School for Social Research and Director of SCEPA’s Retirement Equity Lab (ReLab); Michael Papadopoulos,
ReLab Research Associate; and Anthony Webb, ReLab Research Director.