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Your Retirement Prospects Are Bleaker Than Ever


Your Retirement Prospects Are Bleaker Than Ever

Dean Baker

The vast majority of Americans who expect to retire in the next decade can count on little income other than their Social Security. This is true not only for low-income workers, who have struggled most of their lives, but also for millions of middle-income workers. Although Social Security is a tremendously important program, and provides a solid base that retirees can depend upon, its $16,000 average annual benefit doesn't go very far. Many if not most can expect to see sharp reductions in living standards.


Above and beyond any paucity of effective retirement vehicles for the majority of citizens is the criminal exclusion of financial education in public schools. By design (I'm speculating, but determined I'm correct.) students are not taught to be financially aware, much less prudent. I was "schooled" by my parents, who grew up during the depression. All lessons were by example and were very effective in inculcating a healthy respect for what money is and isn't. To my late parents I am forever grateful.


I like Dean's work a lot, but he really dropped the ball on this one.

Illinois is the poster child for screwing and stiffing retirees.

NO ONE should trust IL with their pension funds, and the state should in no way be considered a model for the future - except as a retirement dystopia.


Agree. These are the types of issues to write and solve. As they are at the root of our contemporary idiotically sophisticated retirement or financial models. The best ever longitudinal study is the transmition of knowledge (financial included) from parents to children...except that in a savage commercialized society that link is 'by design' broken. This article is useless in my view as it tries to convince us that putting a small patch into a pair of torn out pants...solves some sort of a problem. There is no need for 401 k this and that....expand and redesign social security as the rest of Europe has done for a long time...well if the 'pursuit of people's happiness' were the central goal.


The general orientation here is reasonable, but it is painful to see all around the optimism that seems built into so much commentary on these things.

First, a reduced "standard of living" in the usual sense would be hunky dory here. But we are really not talking about folks giving up the 3-bedroom house where they raised their kids and moving to smaller digs, are we?

We read a lot about how younger people are unwilling to take on the problems of their elders by way of paying for social programs, and some of that may be true: I have certainly heard similar from lots of people, many of them younger than I.

I suppose there is some bitter amusement in the ignorance here, though I wonder how long I may have to enjoy it. What happens if there is no socialized elder care, whether by government or hired out, is that either you stand beside Mom when she stands up, or Mom falls over and hits her head or breaks her hip. That will make for a stark Monday morning for a lot of people, and they will not all be elders when it dawns on them that they have screwed up.

If you have large extended families and Mom is in a chair in the living room making no sense while the kids bob and chirp and make her knees part of the fort, that is not a great sacrifice to anybody. But few of our parents, fewer of us, and still fewer of or children will end this way. Family failing, as it has, if you have a single residence in which maybe 4-12 elder people may reside, with 4 or 5 caregivers in shifts, then people can take care of them with relatively little financial expense or loss to human function.

But of course these possibilities, at a couple thousand per month and up, were mostly knocked out when Goldman-Sachs and the various hedge-fund-monkeys, the Bushes and associates and the Obamas and associates, lifted Mom's retirement funds in and around '08.

Were I a young person, I would sure be looking for intentional community of some sort. I am not so young, but I still am looking, though now I come with lots more conditions and with way less to offer than I once had--except advice.

You whippersnappers could easily wind up getting less and giving more to old people than any group in history, before or after, and partly because so many people do not wish to keep a social net.

So, with apologies for all the advice, I am off to catch Dad before he falls.


Although Baker is correct that most Murkins are totally dependent on Social Security for funding their retirement, he needs to also mention that DC politicians are under constant pressure to reduce Social Security benefits and will have plenty of cover and leverage to do so when the next financial meltdown occurs and the too-big-to-fail banks, insurance companies and drug companies are first in line for taxpayer funded bailouts that make the $26 trillion 2008 bailouts look like a bargain.


In Australia there has been compulsory superannuation for around 25 years.

"If you work for a company or organization, your employer must pay money into a super account in your name, which is then managed by a super fund. The formula used is currently 9.5% of your income, including bonuses, commissions and loadings. This is called the Super Guarantee and it's the law."


Critiques of it are here:


The word is transmission.


Sounds way too rational for America. Of course that is why we have so much poverty and homeless in such a rich country. To be fair to billionaires we don't force people or corporations to actually care about humanity. Only profits matter ... as is plainly obvious.

People are an afterthought.


Sometimes it helps to put things into perspective.The average former welfare family received benefits of some $4k per year -- one-fourth the average Social Security income for one. Middle class America said that welfare aid was so high that the poor were living "better than the middle class," buying up big-screen TVs, designer clothes, etc. Try to get by on $4k, even with Medicare/Medicaid.

Learn to adjust. I'm on Social Security myself, no other income/assets, and it's enough to get by. We are the generation that is responsible for the "Reagan Revolution" that nearly wiped this country out. Yes, masses of us opposed the right wing agendas of Reagan, the Bushes and Bill Clinton, but we're collectively responsible all the same -- and more importantly, we have an obligation to step back for the next generation. We have a moral duty to start taking a stand for all those young people who have been pushed into hopeless poverty by the policies we supported or allowed since Reagan.


Wow ... Dean Baker must have been in need of some quick cash because this is pure tripe!

Workers would have a modest amount (around 2% to 3%) deducted from each paycheck, although they could opt out if they chose.

The national average wage for 2014 was $46,481.52. Keep in mind that the average wage includes those workers earning the federal minimum wage of $7.25 an hour all the way up to those earning millions (or billions) a year. Hence, the national average wage is much higher than the wage of the average Joe and Jane Worker trying to make ends meet.

However, let's use the national average income provided to illustrate the absurdity of this touted program. Let's assume that Mr./Mrs. Worker contributes 3% ($1,394.45 annually or $116.20 monthly) to a state-sponsored retirement using the following assumptions:

  • The savings period is 35 years (age 30 - 65).

  • The average rate of annual return is 4.0%. (Savings average interest rate since 2008 is .25%; 10-year average on stocks is 7%.)

Based on the information above, Mr./Mrs. Worker will have saved $106,175.53.

Let's assume that Mr./Mrs. Worker has determined he/she will need $39,500 a year (in today's dollars) during retirement. Assuming a 2.0% annual inflation rate, the annual amount of money needed annually will be $78,996. Assuming Social Security will meet $16,000 of this income need, the annual dollars needed from personal savings is $62,996. In other words, the amount of money accumulated will last less than less than 2 years!

Mr./Mrs. Worker must save more than 3% of his/her income for retirement using this capitalist program. Otherwise, he/she will be living in deep poverty ... until death.

The second huge problem with the state-sponsored retirement program presented in this article: the worker can opt out of the program. With many average workers unable to meet his/her day-to-day expenses now, many will have no other option but to opt out of the program.

The third problem is that the program will be administered by the state or entrusted to a private (for-profit) financial institution on behalf of the state. The financial situation today in most states is bad ... really bad. How many people would trust their state to safely (and honestly) handle their hard-earned money over a long period of time?

In my opinion, the only reasonable solution is Universal Basic Income. As the number of people near retirement age keeps increasing, and the number of younger people available to work far exceeds the number of available jobs, and the ever-increasing number of people at or near poverty; the only reasonable, long-term solution to prevent deep poverty in mass is by implementing Universal Basic Income.

How can we fund Universal Basic Income? An excellent way is reduce the military/defense budget by at least 50% and close the nearly 800 military bases in foreign countries. Let's spend our country's capital in taking care of its citizens instead of killing millions of civilians and producing tens of millions of war refugees in other countries.


Part of the problem is going into retirement with a house that still has a mortgage to be paid off, with a car that either isn't paid off or needs major repairs or replacement. Along with the idea that retirement is going be like an "endless vacation" where you travel here and there doing things that you didn't have "time" (or money) to do when you were still working.

Key to a low cost retirement is to plan to live in a low cost area of the country after retirement.Do things that don't cost a lot of money or require much travel to do. Only drive somewhere when you actually need to do so. Keep your car well maintained and it will last a lot longer. For low income seniors, there is "Section 8" housing where you pay 30% of your Social Security check minus medical expenses. Get a public library card. Living somewhere "warm" is also a good idea. The rural "South" offers good fishing and hunting. Living costs are also much less in rural areas than in big cities. Taking care of yourself is important. Better to keep yourself reasonably "fit" is better than relying upon doctors to "fix" things. This is how you live when you don't have a lot of money to live the "AARP" life (as shown in the magazine).


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This seems a sensible idea, which is probably why the USA has not done it.


Very true, Illinois is on the road that Puerto Rico is currently trying to get out of.


Thanks for that post, GoldenRule,

Not surprising that Obama is screwing the citizens of IL again with his ex- chief-of-Staff Chicago Mayor Rahm Emanual . Obama was notorious in Chicago for throwing poor people out of their buildings and reselling the space to high-dollar condo projects.

Presidential Candidate Barack claimed to America that he was a "Community Organizer" in Chicago. I found out that in Chicago, the term "Community Organizer" is code for gangster.

Looks like he's going to Sting them again with a BS retirement Ponzi Scheme that will never pay out like it's supposed to. Bush/Obama never got caught for robbing the US Treasury with their phoney Bank "Bail-Outs" so now the mob is moving on to shaking down potentially huge retirement funds.

If I was a betting man, that would be my wager as to what is going on around here ....



I have a speculation as to when the next financial meltdown may occur. We rarely go eight years between big crashes, so we are overdue. Bush raided the US Treasury his last 60 days in office to leave the country a wreck for the next Administration. If a Repuke wins, might not Obama do the very same thing his last few days in office?

The example has been set since not one Bankster went to jail for gambling everyone's future away. If Clinton wins, expect economist Larry Summers to show up again in D.C. Larry has been pushing hard for "Negative Interest Rates" where ten percent, for example, of all accounts at an institution get confiscated by the bank for the privilege of keeping your money there.

Already there is concern that unlike 2008, FDIC is not funded properly this time and instead of being protected by FDIC insurance, savings accounts will be handled by Bankruptcy Judges more like forfeited shareholders shares; cash accounts will be treated as assets to be liquidated directly instead of the government bailing out the too-big-to-fail banks.

Of course, oversize mattress sales may skyrocket....


Next iceberg leaving in 15 minutes.


"In response to this situation, Illinois is developing a state-run retirement program that will make it easier and cheaper for workers to save"

Illinois!!!! Are you kidding me, this state is giving State lottery winners IOU's instead of the Cash Money winnings that is in their very hands from the ticket sales! I certainly wouldn't Trust Raum Emanuel, Barak Obama, and Rod Blagojevich's cronies with my hard earned savings... This is near laughable and sad at the same time....


Agreed, and I just have to wonder what happened to that $2.3 TRILLION that Rumsfeld announced missing from the Pentagon budget the day before 9-11-2001-Rabbi Dov Zakheim, Undersecretary of Defense and Comptroller from 2001 to 2004 under the George W. Bush administration surely knows something. Strange how all those records happened to be in the area of the Pentagon that was struck by that Missile or uh hm airliner? Anyhow, kinda leaves the mind to wander about black-ops hush money payoff for all of the insiders to keep it all hush-hush- I just can't control my imagination at times...