Fiscal trouble ahead for most future retirees

For the first time since the New Deal, a majority of Americans are headed toward a retirement in which they will be financially worse off than their parents, jeopardizing a long era of improved living standards for the nation’s elderly, according to a growing consensus of new research.

The Great Recession and the weak recovery darkened the retirement picture for significant numbers of Americans. And the full extent of the damage is only now being grasped by experts and policymakers.

There was already mounting concern for the long-term security of the country’s rapidly graying population. Then the downturn destroyed 40 percent of Americans’ personal wealth, while creating a long period of high unemployment and an environment in which savings accounts pay almost no interest. Although the surging stock market is approaching record highs, most of these gains are flowing to well-off Americans who already are in relatively good shape for retirement.

Liberal and conservative economists worry that the decline in retirement prospects marks a historic shift in a country that previously has fostered generations of improvement in the lives of the elderly. It is likely to have far-reaching implications, as an increasing number of retirees may be forced to double up with younger relatives or turn to social-service programs for support.

“This is the first time that Americans are going to be relatively worse off than their parents or grandparents in old age,” said Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research. The Washington Post

HIGHLIGHTS

The economic downturn exacerbated long-term factors that were already eroding the financial standing of aging Americans: an inexorable rise in health-care costs, growing debt among older Americans and a shift in responsibility from employers to workers to plan for retirement.

The consequence is that the nation is facing a huge retirement savings deficit - as much as $6.6 trillion, or about $57,000 per household, according to a U.S. Senate report.

Half of American workers have no retirement plans through their jobs, leaving people on their own to save for old age.

The government grants at least $80 billion a year in tax breaks to encourage retirement savings in 401(k)-type accounts. But the biggest benefits go to upper-income people who can afford to put aside the most for retirement, allowing them to reap the biggest tax breaks.

Someone making $200,000 a year and contributing 15 percent of pay to a retirement account would receive about a $7,000 subsidy from the federal government in the form of a tax break, whereas workers earning $20,000 making the same 15 percent contribution would get nothing because they don't earn enough to qualify for a deduction. Someone making $50,000 and making the 15 percent contribution would receive only about a $2,100 tax deduction.

Health-care costs continue to outpace inflation, meaning more out-of-pocket expenses for future seniors. Retirees are also slated to pay more for their health care with Medicare premiums, which are deducted from the Social Security checks of senior citizens, set to rise from 12.2 percent to 14.9 percent by 2030. The Washington Post

Original Article
Source: presstv.ir
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