The Road to Retirement is a Bumpy One

Unfortunately, the retirement crisis doesn’t appear to be a blip on the political radar for the upcoming election, either.

“Medicare, of course, is an issue. But Social Security, a critical source of income for most retirees, is barely mentioned, though the parties have sharply different views on how to improve it. The Democratic platform correctly acknowledges that it can be strengthened and preserved, implying that a modest mix of tax increases and benefit cuts is needed. The Republican platform vows to ‘give workers control over, and a sound return on, their investments.’ That sounds like privatization, which would be cruel folly,” reports the NY Times.

What either side is neglecting to acknowledge is that American’s can’t afford to retire, period. The proposed programs are not truly taking this fact into account.

According to the Center for Retirement Research at Boston College, “The crux of the problem is that as traditional pensions have disappeared from the private sector, replacement plans have proved woefully inadequate. Fewer than half of the nation’s private sector workers have 401(k) plans, and more than a third of households have no retirement coverage during their work lives.”

According to Federal Reserve data, there was a 40 percent decline in the median net worth from 2007 to 2010, to $77,000. When looking at households near retirement (ages 55 to 64) the decline was 33 percent, to $179,000.

According to Moody’s Analytics, “Home equity, once thought of as a cushion in retirement, has been especially devastated. The bursting of the housing bubble has erased nearly $6 trillion in equity, and left nearly 13 million people owing a total of $660 billion more on their mortgages than their homes are worth.”

The article by NY Times also said, “A separate study by AARP has found that as of December 2011, people ages 50 and older accounted for 3.5 million underwater loans, with 1.2 million in or near foreclosure. That is on top of the more than 1.5 million older Americans who have already lost their homes in the bust since 2007.”

Given the troubling economic times, most people are living under the notion they can work longer to make up for any financial hardship. Is this feasible, though?

The article also mentioned that working longer meant that people could rebuild their savings, delay taking Social Security, and would ultimately improve the payout in doing so.

“Workers ages 55 to 64 have been less likely than younger ones to lose their jobs in recent years; their jobless rate has averaged 6.1 percent in the past year, compared with 7.3 percent for workers ages 25 to 54. But when older workers become unemployed, they are much more likely to be out of work for long periods and less likely to find new jobs, while those who do become re-employed usually take a big pay cut.”

As far as political proposals to help improve the retirement situation, Senator Harkin of Iowa and President Obama have both made similar suggestions.