Retired and Broke
June 9, 2015
If you are an older American headed toward retirement, there is a good chance you will be a poor American, according to a new government survey. And the tragedy is that we can fix the problem of old and broke in America, if it were not for entrenched, status quo forces.
The Government Accountability Office (GAO) has just released a report analyzing the household savings of those approaching retirement. It is not a pretty picture.
Using 2013 Census Bureau data:
- The GAO found 52 percent of households aged 55 and older have no retirement savings in an Individual Retirement Accpint or a defined contribution plan like a 401(k).
- If we look at those between the ages of 55 and 64 — that is, getting close to retirement, or just did — nearly 70 percent have less than $100,000 in savings.
- Among those households that do have savings, the median saved is about $109,000. The GAO says that would buy an inflation-protected annuity that would pay about $405 a month beginning at age 65.
Social Security is the largest source of income for the majority of retired workers. The Social Security Administration says the average current retired worker receives about $1,333 a month. And the average spouse of a retired worker gets about $677, or about $2,000 a month for a senior couple — that is, if Social Security holds out.
The Social Security trustees warn the Social Security Trust Fund is rapidly declining and will only be able to cover full benefits for another 20 years or so, at which time, if Congress does not step in, retirement benefits will be cut by about 25 percent, which drops the average couple's benefits in today's dollars to about $18,000.
The current federal poverty level for a two-person household is $15,930. So, while millions of seniors are not technically poor, they are pretty close to it — even with that $405 per month annuity.
Source: Merrill Matthews, "Old and Broke In America," Institute for Policy Innovation, June 5, 2015.
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