Once upon a time, as recently as the early 1900s, Americans were typically self-employed and worked until they died — which they could expect to happen, on average, around age 65. The old and infirm relied on charity or extended families for support. That all changed amid the rapid industrialization and rising prosperity of the 20th century. Life expectancy for those who reached working age shot upward but companies, which increasingly dominated the economy, proved unwilling to employ older workers, whom they saw as less productive. For an increasing number of people, a period of idleness became possible, even inevitable.
With old workers forced out of employment without the financial means to support themselves. the government recognized the new reality by establishing Social Security in 1935. The program initially started paying benefits at age 65, which became the official retirement threshold. Yet it was never intended to provide more than a bare minimum income. To maintain a decent standard of living, people (or their employers) had to do something they had never done before: set aside enough money for life after work.
Most experts agree that a significant portion of the population will lack the resources to live comfortably after they stop working. This lack of savings is more than a humanitarian crisis. It is also a social and fiscal disaster in the making. The more people reach retirement with inadequate resources, the more they will rely on welfare programs such as Medicaid, food stamps and Supplemental Security Income to survive. One study estimates that by 2030, seniors will require an added $7 billion in public assistance annually in the state of New Jersey alone. That’s almost a fifth of the current state budget. And New Jersey doesn’t have an outsized senior population. The situation in other states could easily be worse. Under very reasonable assumptions, this could overwhelm state budgets across the country.
For many workers in the United States, retirement is a train without brakes barreling down the tracks. It will come no matter what, but it may be painful when it finally arrives. In a 2014 Federal Reserve survey, 38% of those surveyed had no retirement plans, or planned to continue working as long as possible. This number is much greater in low income communities; among those polled with an annual income of $40,000 or less, 55% plan to never retire. And 53% of total respondents replied that they would be unable to cover a $400 emergency should problems in daily life arise.
A similar 2016 study performed by the Economic Policy Institute came to similar conclusions: just under one half of working-age families (39 to 61 years in age) have absolutely nothing saved for retirement. Zero. The mean amount of savings for families in this bracket is a paltry $5,000, or the equivalent of a month or two of living expenses.
This is not a matter of lazy and irresponsible slackers getting their comeuppance. For the most part, these are people who have worked hard and paid taxes all their lives but were unable to afford to set aside resources for retirement. Add on top of this healthcare costs rising rapidly in lockstep with chronic illness rates and you have a looming crisis of unprecedented scale and scope.
It is past time to stop ignoring this problem because it is already here and is only going to get worse. Attitudes about the "safe and smart" thing being employment need to change and people need to begin establishing their own (perhaps part time) businesses. Side gigs and multiple sources of income need to become the norm. Let's open the discussion.
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