Half of Older Americans Have Nothing in Retirement Savings | Hacker News Reader

Half of Older Americans Have Nothing in Retirement Savings

bloomberg.com

16 pointssahin27 comments

There is a strong need for financial education.

There is a small minority of Americans who won't have any retirement savings due to catastrophic illness, or a lifetime of inability to get a good paying job, or some other factor. But this number should be very small. Everybody else should be able to accumlate money for retirement.

To save for retirement takes discipline and means forgoing things today to save for tomorrow. The benefits of saving for retirement must be indelibly impressed into people's minds for this to happen.

Is it really more education or a lack of impulse control to go out and buy the latest greatest phone every two years?!

Do you have a family Barney? I find the run rate costs of raising a family are astounding even with a very healthy two incomes. It doesn’t shock me that most households barely scrape by at the end of the month without any reserves to save.

Out of curiosity, and I don't have a family, what are your costs?

I suspect you can support a family pretty cheapily. The problem is everyone wants to "do everything possible" for their kids -- pay for the best child care, the best schools (or housing in a good school district), clothes and phones to keep up with the Jones' kids, $500k to bribe your way into USC, college tuition, etc. Yes, that all adds up, but I suspect you can also allocate an appropriate percentage of your income to retirement and just pay less for some of those things.

Adding our kid to our health insurance (through employer) added $300 a month. Trying to be responsible and saving for college adds $100 a month.

Kid is too young to stay at home by himself and we don't live by family. So we pay for before/after care (school hours are from 9-3:30). This is astonishingly $600 a month, a relatively cheap option around here (there's cheaper but not by much).

There’s a stronger need for CEOs to stop acting like mafia members and demanding 500 times what a standard employee earns. If you fleece the poorest, naturally you’re going to have people with no savings. CEOs will naturally pat themselves on the back and say “I deserve this”, but do their employees deserve to be living on the streets post retirement? It seems like people are no longer anything but a commodity to be used until broken and then discarded.

It was and still is shocking to me that this isn't taught in school.

I don't think that small minority is as small as you might think. Life is full of uninsurable disasters.

The "good" news is that there are only a few years of retirement you really want to hang around for anyway (as opposed to a slow miserable death of dementia and other diseases). Seven years, for example. (67 to 75)

When I run out of money, I'm out.

Does America has Social Security where the elderly get something?

Yes. But how much you get depends on how much you paid in during your working years, as well as what age you retire at.

I think that's pension.

What I mean is when person don't have eugh pension to live with, do they beg on the street corner?

It's not pension. Everyone with an income pays into social security and how much is stated on your pay statement. Companies opted to replace pensions with a 401k so once the worker leaves the company, they are no longer required to pay more into it (correct me on this if I'm wrong). The 401k is market based so there's risk involved whereas a pension was guaranteed but even that is now based on the market so during the 2008 market issues, even pensions saw a dip in value (pension funds).

Pensions are not always guaranteed if the company goes under, they're also often incredibly mismanaged. Everyone should be moved to 401k, particularly the public sector which is wreaking havoc across state budgets

401k plans have huge society inefficiencies. If someone dies early, the 2 or 3 million they save up in a 401k plan is wasted. Pension plans can capture that inefficiency and provide superior value over 401k plans as a result.

Annuities try to bridge the gap. But I admit that I don't know too much about them.

Stocks and stuff are nice. But what happens if you die early or outlive your savings? At an individual level, you cannot plan such a thing. But a decent annuity company can provide value by smoothing out that kind of variance.

Pensions were a combination of stock plans + annuities. The main issue with Pensions is that people live a LOT longer today than they used to 40 years ago: medicine has gotten much better. So most pension plans (including Social Security) have underestimated how much they need to pay out.

"Fortunately", the American life expectancy is dropping due to the opioid crisis. So maybe things will be a bit better for pensions / annuities / Social Security than we expected just 5 years ago.

The 2 or 3 million? I think I read recently that less than 10% have a million, 2 or 3 million is 1% territory. And if someone does save that and dies early, how is that 'wasted' if it goes to support their family?

Annuities can 100% bridge the gap. The problem is most Americans are financially illiterate, this stuff (401ks, annuities, how much to save) is too complicated for them and most people are too impulsive and consumerist to save enough.

So 401ks/annuities are better on a societal level assuming prudent savvy employees, which is a completely false assumption.

> The 2 or 3 million? I think I read recently that less than 10% have a million, 2 or 3 million is 1% territory. And if someone does save that and dies early, how is that 'wasted' if it goes to support their family?

In particular, it could have gone back to their family sooner. IE: Leaving money in your 401k plan means NOT paying for your kid's college tuition with that money (or their house, or their first car, or their wedding)

Sure, maybe the kid will get a giant payout when they're 30 or 40 years old. But by then, their lives are probably established and they don't really need the windfall. And they only get that windfall if you die.

> Annuities can 100% bridge the gap.

Annuities have the same failure mode as pension plans: if they fail, then no one gets the money they were promised. When comparing 401k plans vs Pension Plans, its definitely a factor to consider.

Yeah, unless they continue to work into their seventies and eighties, have kids who can support them, or start stealing or other crime (begging is actually a crime in much of the US). It's close to impossible to live off of social security even if you had a high paying job ($120k+) in most of America. While Medicare covers some health costs, for preventative and prescription costs, one needs additional healthcare insurance. My mom pays almost $300 a month for that. Then there are property taxes or rent depending if you own a home or not, costs which in most places are constantly going up. And I haven't even gotten to food, electricity, heat, garbage, sewer, or Internet bills. None of those are optional. Car insurance, maintenance, taxes, and gas are also not optional in most of America. It's a shite state of affairs, one that's beyond frightening even as a young person, but most people either don't realize it, or work paycheck to paycheck without any 401k option (tax deferred savings account invested in the market) and can't save anything meaningful.

So... what are they going to do?

It is clear to me that 2020 or later there will be a more socialist America, whether the Americans like it or not. And that could be good for America.

It could be good for America, but I’m skeptical it’s going to happen. Certainly not within 24 months.

> It is clear to me that 2020 or later there will be a more socialist America, whether the Americans like it or not. And that could be good for America.

I'm not entirely sure. We (I'm American) have an attitude of what befalls a person is because of the decisions they made. We have a very "pull yourself up by your bootstraps" and anything that costs one person money to help another is a non-starter. Look at the Affordable Care Act right now. America is an individualistic society.

> We have a very "pull yourself up by your bootstraps" and anything that costs one person money to help another is a non-starter.

And yet there seems to be actual political risk and difficulty to simply repealing the ACA in its entirety without a replacement... because as bad as the ACA is in practice, in theory many Americans want it, or something like it, and do not in fact want healthcare to be left entirely to the free market.

The attitude and outlook you describe certainly exists, but don't conflate the ideology of a single political party to the status of general American culture. We're not all libertarian minarchists and cowboys.

And for such an "individualistic" society, we sure do have a lot of socialism already, such as food stamps, school lunches (hell, public schools themselves) federal student loans, Medicare, Medicaid and Social Security, the GI bill, farm subsidies, public libraries, etc.

I don't think it's as unlikely as you do. The system is starting to fail for a lot of people. We've already seen the regressive populist shift, in response, and a progressive socialist shift is inevitable. Trump won but don't discount how popular Bernie Sanders actually was.

Personally, I do hope you are right and that the direction this country is moving toward a more egalitarian society where a pre-existing condition doesn't mean a death sentence and that we have social programs in place in order to support a base level of retirement. Yet I also fear that me living in a liberal, leftist bubble (living in Boston, working with Democratic candidates, working in tech) prevents me from seeing what other people feel and think. Watching Fox News or Tucker Carlson opens one's eyes about what kind of "news" other people are ingesting.

Trump may have won the election, but a lot of people supported Bernie Sanders as well. And the blowback the Republicans got from their own constituents after trying and failing to sell a repeal of the ACA happened, mostly, because no one but the independently wealthy and corporate interests wants to see it replaced with nothing but the free market.

And when Republicans don't even trust Republicans with healthcare, it suggests a massive failure of messaging on their part.

Totally agree. Unfortunately, most Americans are too stupid to see that even the phrase is ironic, referring to something that's literally impossible to do, just like the act it refers to in real life is for most Americans.

It already is to a certain aspect. Medicare and social security can be considered "socialism." Which is why there's a certain group that wants to do away with it entirely.

Socialism isn’t the problem, it’s decency. If you look at corporations, we’ve had a very strong socialistic corporate culture for some time. People who make almost nothing are the least capable of avoiding taxes that do exist, even if they are lessened. Large corporate entities on the other hand, are often given negative tax bills for reasons I can not begin to fathom.

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