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Retirement crisis looms as Americans struggle to save (www.cnn.com)

submitted 3 months ago by MicroWave@lemmy.world to c/news@lemmy.world

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The number of US workers in the labor market over the age of 75 is expected to nearly double over the next decade, creating a looming retirement crisis.

Retirement savings in the United States were long thought of as a three-legged stool. Americans had pension plans, Social Security benefits, and defined contribution plans like the 401(k). Not anymore.

Pension plans are nearly extinct. About half of private sector workers were covered by those so-called defined-benefit plans in the mid-1980s, but by 2022 only 15% of private sector workers had them.

Social Security payments still provide about 90% of income for more than a quarter of older adults, according to Social Security Agency surveys. But the Social Security trust fund is facing a 75-year deficit, and without intervention it will be depleted by the mid-2030s, meaning that only a portion of retirees’ expected benefits will be paid out. Lawmakers have faced a decades-long political stalemate on how to fix it.

What’s left is the 401(k), which 68% of private industry workers have access to, but only 50% use.

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[-] Burn_The_Right@lemmy.world 49 points 3 months ago

Social Security payments still provide about 90% of income for more than a quarter of older adults...

And conservatives desperately want to get rid of Social Security. In fact, at every opportunity, they fight against the ability for people to retire. Conservatives delight in the misery and death of the most vulnerable, including the elderly. This is just who conservatives are at their core.

These problems cannot be solved as long as conservatives have the power to cause such problems.

[-] bashbeerbash@lemmy.world 7 points 3 months ago

Conservatives are just easier to dupe. Their values align more with the goals of our adversaries. I would feel bad for them since the odds are stacked against them. But if they can bitch about their wife or daughter, why can't they bitch about the guy fucking them in the ass?

[-] Wiz@kbin.social 45 points 3 months ago

Simple solution for saving Social Security - raise or remove the cap on earnings.

Right now, we tax poor people higher than people making over $170k.
The more money you make, the less you pay. It's a reverse-progressive tax. Let's tax rich people the same as poor people.

[-] TangledHyphae@lemmy.world 9 points 3 months ago

This. Why do income taxes stop at 170k?? What possible reason is there, logically, surely there had to be an initial reasoning?

[-] Asafum@feddit.nl 3 points 3 months ago

We're in a plutocracy.

[-] ozebb@lemmy.world 5 points 3 months ago

The SSA has a great site showing projections into the future of various proposed modifications. That plan specifically does not on its own solve the problem completely (though it does help, extending the time frame for exhaustion of the trust fund out to 2060 or so). If we wish to avoid the exhaustion of the trust fund, we'll need other measures as well.

[-] COASTER1921@lemmy.ml 5 points 3 months ago

Although it doesn't solve the problem long term it buys enough time to not deal with it for another generation. Ethically applying a tax to all but the wealthy doesn't make sense anyway, so the public backlash for this option should be much lower than all others proposed with this level of impact.

[-] card797@champserver.net 15 points 3 months ago

I hate 401k. I don't want my money largely tied to the stock market. I don't want it there. Period.

[-] Wiz@kbin.social 13 points 3 months ago

You could put your 401k money in a money-market fund or something like that. It doesn't have to be invested in the stock market.

Also, if you're young, and you've got extra dough, do yourself a favor and start a Roth IRA. They are amazing.

[-] BottleOfAlkahest@lemmy.world 6 points 3 months ago

I second the Roth, there is a much lower yearly cap (around $7k). But you've already paid the taxes on it and can withdraw it tax free down the line!

[-] ShepherdPie@midwest.social 1 points 3 months ago

It's definitely good to diversify, but these really only pay off if you expect to be in a higher tax bracket during retirement (you make $60k/yr at your job now but expect to withdraw $150k/yr during retirement). With a 401k it's the reverse, where you expect to be making less per year during retirement, which is probably more applicable for most people.

[-] BottleOfAlkahest@lemmy.world 1 points 3 months ago

Thats not totally true. The import thing about a Roth is that the earnings grow tax free. That's great even if you're withdrawing less in retirement as long as there was growth in your Roth between when you contributed and when you start withdrawing. If you plan to withdraw your Roth in the next couple of years then yeah probably not worth as much, if you have a couple decades before you plan to retire? That may be a different story.

[-] ShepherdPie@midwest.social 1 points 3 months ago

But you're contributing less because the contributions have already had ~20% or more taken out in taxes at a period when it's worth 'the most' with respect to future inflation.

[-] COASTER1921@lemmy.ml 2 points 3 months ago

Employer sponsored 401k plans usually don't give that much choice in how you allocate the money.

That being said our whole economy is tied to the stock market, in my opinion to the point it's "too big to fail" (at least catastrophically). Betting against it on the order of decades would be a very bad idea as our whole economy relies on inflation of the dollar.

[-] partial_accumen@lemmy.world 1 points 3 months ago

Employer sponsored 401k plans usually don’t give that much choice in how you allocate the money.

401k plans aren't usually the place to do exotic investing. Most offer at least one fund matching the S&P 500 or total stock market, another covering the total bond market, then usually a mix of small cap, mid cap, growth, and income funds.

Realistically you only need some funds moderately solid in your 401k while you're employed there. As soon as you change jobs, you can roll it over to your own IRA where you have much more control.

That being said our whole economy is tied to the stock market, in my opinion to the point it’s “too big to fail” (at least catastrophically).

It isn't that those companies are publicly traded in the stock market that makes them "too big too fail" all at the same time, its that the stock market also overlaps with the huge majority of GDP generating commerce in the USA. If the stock market is failing (the whole thing at the same time) then the US economy is failing.

[-] partial_accumen@lemmy.world 1 points 3 months ago

I don’t want my money largely tied to the stock market. I don’t want it there. Period.

The reason most choose the stock market is the higher returns, which is critical to combating losses from inflation. May I ask what method you're employing to increase returns on your savings or are you simply accepting the loss of value of your saving to inflation? No judgment, I'm just curious.

[-] ShepherdPie@midwest.social 2 points 3 months ago

People don't understand finances here judging by the vote tallies.

Yes the stock market is bullshit but you're still earning more money there than you would anywhere else. You're not going to be retiring off of cash under your mattress or with it earning 0.05% in your Bank of America savings account. With those options, your money is worth less and less each year due to inflation. It's the same reason why you used to be able to buy a house for $5,000 but instead you're expecting that $5,000 to be enough to retire with in 30-50 years.

[-] partial_accumen@lemmy.world 1 points 3 months ago

People don’t understand finances here judging by the vote tallies.

Yes the stock market is bullshit but you’re still earning more money there than you would anywhere else. You’re not going to be retiring off of cash under your mattress or with it earning 0.05% in your Bank of America savings account.

I'm keeping an open mind. Perhaps the poster holding that view of "no stock market" can indeed live on mattress or 5% HYSA interest. Maybe they are planning on retiring in another country with far lower cost of living, and the risk of exposure to equities isn't worth it to them. For retiring in the USA however, I don't know of other ways to grow your saving enough to beat inflation to retire on at a lifestyle resembling that of the working years earning the principcal.

[-] AA5B@lemmy.world 1 points 3 months ago

401k means the money is yours. Put it where you want it. It’s not a good choice to avoid the stock market for such a long term investment, but all investment and savings options are by possible so do whatever you want

[-] captainlezbian@lemmy.world 7 points 3 months ago

Ok but we want social security so all of us have a communal retirement fund guaranteed by one of the most powerful governments on the planet. Socialized insurance against old age.

[-] AA5B@lemmy.world 2 points 3 months ago

Oh, ok, I was assuming that as a starting point. Our elected leaders may only focus on short term and hot button issues, but social security should be a given. Fixing it ahead of time is the best/easiest, but you know they won’t until they have to

While it’s true that industry saw the transition to 401k as a chance to save money and leave us worse off, there are advantages. Compared to pensions:

Owning our own money is a good thing. We control it almost from the beginning, instead of trusting a pension provider
We take it with us, even from relatively short jobs, instead of being locked into one employer for life
and yes, we can choose our investments. Over the decades we should be accumulating retirement money, stocks have always outperformed (obviously not true as you get shorter term).

[-] Frozengyro@lemmy.world 0 points 3 months ago

What is your other idea? Pension plan, where your company invests the stock into themselves or for you and when they fail you have nothing? A much more robust social security (that money is also invested) where you have to trust the government to pay you, and can change your retirement income at a whim? Work a job until you die?

I'm not saying 401k is a good choice either, but what is the ideal solution?

[-] FartsWithAnAccent@lemmy.world 11 points 3 months ago

Retirement? No, it's just a legend.

[-] homesweethomeMrL@lemmy.world 8 points 3 months ago

So, what you got a laptop and a calculator? And a bound notebook . . and an ipad? And two of you working on it with no bills or statements it seems. So I think I see some efficiencies we can wrest out of your process here.

[-] bluGill@kbin.social 2 points 3 months ago

50% in 401k is about equal to the 50% that was in the pension plans. In the mid 1980s 401k was not common (it wasn't even an option until 1978 and took time to catch on). If you are lucky enough to have a 401k option you are better off than a defined benefit pension which had so many limits that you didn't want it - they were great if work for the same company for life but if you switch jobs they don't follow you. My dad started a job in 1975 that had a pension - when he was older he regretted not joining it until he did the math and discovered on retirement he would have got $.75/month from it - the company laid him off in 1985 so he had no option of contributed for 30 years where it might have been an okay deal - but only okay as the inflation of the years between joining and retiring wasn't factored in.

Pensions should be a better deal than they are, but they have so many limits in the real world that make them a terrible investment. Overall we are about the same. Though I agree 50% not having a good retirement plan in place (only SS is not a good plan) is not a good situation.

[-] FlyingSquid@lemmy.world 4 points 3 months ago

If the pensions were government-backed, those issues wouldn't exist.

[-] bluGill@kbin.social 6 points 3 months ago

Social security is government backed and here we are.

Pensions are government backed as well. Some of the reasons they are a bad idea is the government doesn't want to take them over when they lose all and so laws force overly conservative investments which means low return on investment. (do not confuse conservative investment with conservative politics) This was done because some companies made some really bad pension investments and so their retirees lost all (pension invested in company stock, company went bankrupt and people months away from retirement or already retired lost), but the end result is 401k has a much better return on investment.

[-] ShepherdPie@midwest.social 1 points 3 months ago

If pensions were government backed, we'd probably see pension managers gambling the shit out of that money.

this post was submitted on 02 Apr 2024

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