COMMENTARY | With big businesses unwilling to bring back pensions or raise wages, seniors are left with tough decisions, and younger generations are left behind
Despite its reputation as the wealthiest generation, baby boomers (generally considered to be those born between 1946 and 1964) are facing a retirement nightmare.
A recent St. Louis Federal Reserve study of the retirement readiness of U.S. families came to the same conclusion but put it more gently : “It could be worrisome that, for many American households, the total balances of their retirement accounts may not be sufficient to ensure a solid life in retirement.”
The investment industry, always ready to deflect blame, argues that the problem is caused by insufficient savings. But even Barron’s, a sister publication of The Wall Street Journal, understands what is really happening.
As a recent article explains , “America’s retirement crisis wasn’t created because of character flaws or personal irresponsibility. Nor can it realistically be fixed by technocratic fixes. The ugly, unspoken truth is that many people are just not earning enough money. They barely have enough to cover their daily expenses; they don’t have enough left over to be able to save.”
Golden years are out of reach
Baby boomers are moving rapidly toward retirement. Those born in 1946 are now 73, and those born in 1964 are now 55. Despite being celebrated for their good economic fortune, especially in contrast to millennials , a Stanford Center on Longevity examination of retirement preparedness found that “baby boomers are in a financially weaker position than earlier generations of retirees.”
For example, the study found that boomers age 55 to 60 years old had saved less than previous generations at the same age. They also had a higher debt burden than prior generations at the same age. But boomer problems are not just comparative. The study also found that approximately 30% of baby boomers had no money saved in retirement plans in 2014, when they were age 58, on average, “leaving them little time to start saving for retirement.” The median balance for those who held a retirement account was only $200,000, far too small an amount to generate the income needed to carry a person through a 20- to 30-year retirement.
Looking just at retirement-age boomers, a 2018 “PBS News Hour” report noted , “Nearly half of Americans nearing retirement age (65 years old) have less than $25,000 put away, according to the Employee Benefit Research Institute’s annual survey. One in four don’t even have $1,000 saved.”
African-American and Latinx baby boomers face even greater problems, earning less money and having far less retirement savings than white Americans. According to a Forbes article , “The average white family had more than $130,000 in liquid retirement savings (cash in accounts such as 401(k)s, 403(b)s and IRAs) vs. $19,000 for the average African American in 2013, the most recent data available.”
Latinx retirement savings also trails that of whites. For example, in 2014, among working individuals age 55 to 64, only 32% of Latinx had money in a retirement account compared with 59% of whites. The average Latinx account held $42,300 while the average white account held $103,500.
With private pensions and personal savings inadequate to fund a decent retirement, it is no wonder that boomers strongly defend Social Security. But, as important as it is, the average Social Security check in 2018 was only $1,422 a month or $17,064 a year. It should therefore come as no surprise that research by the Institute on Assets and Social Policy finds that one-third of seniors have no money left over at the end of the month or are in debt after meeting necessary expenses. Or that growing numbers of seniors are making the decision to forgo retirement altogether, by either continuing to work or returning to the labor force.
Goodbye to retirement
According to the 2019 report “Boomer Expectations for Retirement,” from the Insured Retirement Institute, one-third of boomers plan to retire at age 70 or not at all. And one-third of employed boomers ages 67 to 72 postponed retirement. Thus, while labor force participation rates are declining for many age cohorts, they are growing for boomers and older workers. Sadly, many of these workers have had little choice but to accept low-paid, physically demanding work at some of America’s richest companies (e.g. Walmart and Amazon) who are delighted to take advantage of their desperation.
Jessica Bruder’s 2017 book, “Nomadland: Survival in Twenty First Century America,” describes mostly white baby boomers who, strapped for money, decide to buy used RVs and travel. We learn about the friendships they make, and also the minimum wage seasonal jobs they are forced to take to survive.
Zhandarka Kurti draws on Bruder’s work to highlight their Amazon work experience:
“With its motivational slogan of ‘work hard, have fun, make history,’ Amazon recruits seasonal workers at various ‘nomad friendly events’ including RV shows and rallies – in more than a dozen states across America. … Walmart and Amazon, the two competing retail giants and also the country’s largest employers, allow their workers to park overnight, an attractive perk for many older nomads who struggle with food security let alone rent. ...While most of the nomads are made aware of the physical aspects of the job (working in Amazon fulfillment centers) during the training seminars, they are nonetheless surprised by just how much pain they are in after a day’s work. … Amazon’s solution is to offer free over-the-counter pain killers. … Amazon leaves older workers so physically tired that they have little occasion to enjoy their leisure time. Instead they spent the remainder of their ‘free’ time nursing themselves back to health to survive another workday.”
Leading American businesses do not favor bringing back pensions, or boosting wages, or paying higher taxes to strengthen and expand Social Security and other social services. Thus, if existing trends are not challenged and reversed, the boomer generation (or at least a significant minority) may well be the last to experience some sort of satisfactory retirement. This development is yet another sign of a failed system. Boomers need to find ways to help younger generations keep the goal of a satisfying retirement alive and join in a common fight for the structural changes required to realize it.
Martin Hart-Landsberg is a professor emeritus of economics at Lewis & Clark College.
Street Smart Economics is a periodic series written for Street Roots by professors emeriti in economics. Mary C. King is a professor emerita of economics, Portland State University.
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