With a new piece of news, Americans have been warned of years of an impending retirement crisis, yet things continue to go from bad to worse, even if everything seems to be going well.
And Inflation interest rates were low and stocks were in an extended bull market shortfall of a trillion dollars in savings.
War decades—high inflation in Europe—the fastest rate-growth cycle since the early 1980s—and recession fears, for the Boston College Center, resulted in market turmoil that pushed $3.4 trillion into 401(k)s and $4 trillion in cash. IRAs will be wiped out in the first half of 2022, according to Alicia Munnell, director, retirement research.
This is for those who have retirement accounts. Nearly half of private sector employees do not have employer-sponsored retirement plans and many of those who save very little is a problem that cannot be easily fixed.
This contributes to the sense that the American Dream is in decline and rising inflation and volatile markets are bad news for those in or near retirement. The picture could be even worse for young Americans living off the housing market.
Struggling to make money and buried under mountains of student-loan debt, Richard Johnson, a retirement specialist at the Urban Institute, said declining living standards are cause for concern for a large portion of the population.
For those who are not in that age group, this is still worrisome because it can overwhelm the social safety net. Boston College estimated that American households lacked $7.1 trillion in retirement-savings, half of which had to stop working. After doing so, they faced a low standard of living.
According to Munnell, that number hasn’t changed much as millions of Americans face the reality of spending their senior years in difficult conditions, according to Munnell, despite rising stock and housing prices over the past three years.
Americans worked until they died or simply couldn’t anymore, at which point they would rely on charities or extended family for support, as President Franklin Roosevelt described Social Security in the misery of the 1930s.
The program was intended to provide a minimum level of support, with individuals and employers expected to supplement it as life expectancy increased and people spent more years in retirement, but the generous defined-benefit pension plans of old were largely missing. As companies cut costs and adopt 401Ks.
The third works quite well for the workers. Not so much for the middle third and not so much for the bottom third at all. The top third always works for companies with 401K plans, Munnell said.
The middle third goes in and out of employment with coverage and ends up with a very low balance and the lower third is usually not covered by any plan and is entirely dependent on Social Security retirees of the baby boom generation Is.
According to the bureau, the number of Americans 65 and older will rise to 73 million by 2030, or about 21% of the population, from 49 million in 2016, or 15%, too little to attack the problem politically.
The idea of a national auto-IRA that workers can pass from employer to employer has been withheld for more than 15 years, but the only real action at the state level is most state plans.
An even bigger concern is whether Social Security can survive in its current form if Congress can reform piecemeal. If no changes are made, the trust fund’s reserves are expected to be exhausted by 2035.
Munell said Americans would only receive 80% of their expected benefits.