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A Golden Age of Retirement … For Some

01/06/2020
By Jack Towarnicky

It’s 2020, Another Year Passes Without Entitlement Funding Corrections

Some say, “A generation of Americans Is entering old age the least prepared in decades …Americans are reaching retirement age in worse financial shape than the prior generation, for the first time since Harry Truman was president.”1 Truman left office in 1953 just after I arrived on this earth.

The earliest poverty statistics I could find come from 1959. Back then, there were 15.5 million Americans age 65 or older and 35.2%2 of them lived in poverty. For comparison, there were 64 million children under age 18 and 27.2% lived in poverty.

The 1960 Census shows that there were 16.6 million Americans age 65+. 7.5 million were men and 9.1 million were women. While 33.1% of men were actively employed, just 10.8% of women were.3 The share of retirement-age Americans in the labor force steadily declined until reaching an all-time low in 1985 – doubling since then!4

College-educated adults are the fastest growing segment among older workers (age 65+), increasing from 25% in 1985 to 53% in 2019. This pushed up incomes (average real incomes increased 63% from $48,000 to $78,000). Improved health has been a key driver – 78% report being in good health, up from 69% in 1985. So, even though 4 out of 5 older Americans have left the workforce, the official poverty rate among the 52.8 million Americans age 65+ declined 72% from 35.2% to 9.7%! For comparison, over the same period, poverty among the 73+ million children under age 18 declined 41% to 16.2%.

Perhaps the academic and news columnist claims are premature? Maybe. Assuming America fulfills its commitments, today’s children face significant accumulated debt – a $20+Trillion federal debt, plus $50+ Trillion in unfunded liabilities (Social Security and Medicare 75-year projections which use exceedingly optimistic assumptions).5 Or, if you are a pessimist, consider claims that our entitlement funding gap was already $222 Trillion in 2012, and much more today.6

Unlike various claims that today’s older Americans have retirement prospects worse than those of prior generations,7 studies and data confirm most older Americans are managing and enjoying their retirement years.8 Yes, in the past and in the future, adults who live in poverty likely won’t improve their incomes once they retire.

The greatest risk isn’t our voluntary retirement benefit system or that some workers only have access to an IRA. Nor is it that a minority of workers live in poverty today and may reach retirement age financially unprepared. Instead, if Congress fails to take action to properly fund Social Security and Medicare entitlements, the resulting benefit cuts (and/or the draconian increases in Medicare premiums and/or employment taxes) will either reduce existing retiree benefits or syphon off monies that might have become retirement savings.

Today’s minority may grow to become tomorrow’s unprepared majority.


1H. Gillers, A. Tergesen, L. Scism, A Generation of Americans Is Entering Old Age the Least Prepared in Decades. Low incomes, paltry savings, high debt burdens, failed insurance—the U.S. is upending decades of progress in securing life’s final chapter. Wall Street Journal, 6/22/18, Accessed 11/26/19 at: https://www.wsj.com/articles/a-generation-of-americans-is-entering-old-age-the-least-prepared-in-decades-1529676033
2U.S. Census Bureau, Accessed 11/26/19 at: https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-people.html
3U.S. Census Bureau, Historical Statistics of the United States, From Colonial Times to 1970, Accessed 11/26/19 at: https://www.census.gov/history/pdf/histstats-colonial-1970.pdf
4United Income, Older Americans in the Workforce, 4/22/19, Accessed 11/26/19 at: https://unitedincome.com/library/older-americans-in-the-workforce/ Data source: Current Population Survey, Census Bureau/Bureau of Labor Statistics.
5J. C. Capretta, The financial hole for Social Security and Medicare is even deeper than the experts say, 6/16/18. “… Unfortunately, the gap between spending and revenue for these programs is likely even larger than the official projections show because of assumed but unrealistic cuts in medical-care payment rates and the persistently low birth rates of recent years. … the Medicare projections assume (unprecedented) deep, permanent, and ongoing cuts in payment rates for physicians and hospitals that are difficult to believe will be implemented. … (Actuaries) project that the physician cuts would push Medicare’s fees from about 75% of private insurance payments today to less than 60% in 2030. Medicare’s payments to hospitals would fall from just above 60% today to below that threshold in 2030, and to around 50% in 2050. … The second reason that both the Social Security and Medicare projections may be optimistic is the recent news of declining birth rates. Last month, the Centers for Disease Control and Prevention released data showing that the birth rate in the U.S. is now at its lowest level in 40 years. … If the birth rate remains at the current level indefinitely, the problems for these retirement programs will be much worse than the 2018 reports indicate. The Social Security projections assume a long-term total fertility rate of 2.0. If, instead, the rate is 1.8, the financial hole for the program will be about 25% deeper than is projected in the 2018 report. … As the bad news on entitlement spending and the fiscal outlook rolls in, the silence among the nation’s political leaders is deafening. …” Accessed 11/26/19 at: https://www.marketwatch.com/story/the-financial-hole-for-social-security-and-medicare-is-even-deeper-than-the-experts-say-2018-06-15 See also: J. Towarnicky, House, Senate Action Needed On Social Security, We are already making substantial progress in the employer-sponsored retirement savings marketplace. 10/24/17, Accessed 11/26/19 at: https://www.psca.org/blog_jack_2017_12
6Mercatus Center, George Mason University, Accessed 11/26/19 at: https://www.mercatus.org/system/files/debt-in-perspective-analysis.pdf
7J. W. Russell, Social Insecurity, 401(k)s and the Retirement Crisis, 2014; A. H. Munnell, A. Sunden, Coming Up Short, The Challenge of 401(k) Plans, 2004; J. S. Hacker, The Great Risk Shift, The Assault on American Jobs, Families, Health Care and Retirement, And How You Can Fight Back, 2006, T. Ghilarducci, When I’m 64, The Plot Against Pensions and the Plan to Save Them, 2008. 
8Society of Actuaries, Post-Retirement Experiences of Individuals 85+ Years Old, 2018, Accessed 11/26/19 at: https://www.soa.org/resources/research-reports/2017/2017-post-retire-exp-85-years-old/

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