Americans entering retirement are in worse financial shape than the prior generation, for the first time since Harry Truman was president.
This cohort should be on the cusp of their golden years. Instead, their median incomes including Social Security and retirement-fund receipts haven't risen in years, after having increased steadily from the 1950s.
They have high average debt, are often paying off children's educations and are dipping into savings to care for aging parents. Their paltry 401(k) retirement funds will bring in a median income of under $8,000 a year for a household of two.
In total, more than 40% of households headed by people aged 55 through 70 lack sufficient resources to maintain their living standard in retirement, a Wall Street Journal analysis concluded. That is around 15 million American households.
Things are likely to get worse for a broader swath of America. New census data released this weekshows the surge of aging boomers is leaving the country with fewer young workers to support the elderly.
Individuals will find themselves staying on the job past 70 or taking menial jobs as senior citizens. They'll have to rely more on children for funding, pressuring younger generations, too.
Companies, while benefiting from older workers' experience, also have to grapple with employees who delay retirement, which means they'll be footing the costs of a less healthy workforce and retraining older workers.
https://www.wsj.com/articles/a-gene...epared-in-decades-1529676033?mod=hp_lead_pos5
This is gonna be a huge mess, man. This is what happens when we destroy the social contract.
While I do like 401ks and IRAs, it's clearly not working for many.
For many Americans facing a less secure retirement than their parents, the biggest reason is the shift from pensions to 401(k)-type plans.
A piano and organ maker in the 1880s launched one of the first employer-sponsored pension plans, and railroads, state and local governments, and others followed, according to the Social Security Administration. By the 1930s, about 15% of the labor force had employer pensions.
In 1935, federal officials created Social Security to offer a basic income. Pensions gained steam after World War II, and by the 1980s, 46% of private-sector workers were in a pension plan, according to the Employee Benefit Research Institute.
A seemingly small congressional action in 1978 set the stage for a pension retreat. Some companies had sought tax-deferred treatment of executives' bonuses and stock options to supplement their pension payouts, and Congress authorized the move. The tax-law change ushered in the 401(k), allowing employees to reduce their taxable income by placing pretax dollars in an account.
In the 1980s, union strength was ebbing and a recession pressured employers to reduce pension funding, says Teresa Ghilarducci, an economics professor at the New School. Many employers deployed the 401(k) to displace pensions.
Market declines in 2000 and 2008 revealed the perils of do-it-yourself retirements, as many 401(k) participants cut back on contributions, shifted funds out of stocks and never put them back in, or withdrew money to pay bills.
