There was already mounting concern for the long-term security of the country’s rapidly graying population. Then the downturn destroyed 40 percent of Americans’ personal wealth, while creating a long period of high unemployment and an environment in which savings accounts pay almost no interest. Although the surging stock market is approaching record highs, most of these gains are flowing to well-off Americans who already are in relatively good shape for retirement.
Liberal and conservative economists worry that the decline in retirement prospects marks a historic shift in a country that previously has fostered generations of improvement in the lives of the elderly. It is likely to have far-reaching implications, as an increasing number of retirees may be forced to double up with younger relatives or turn to social-service programs for support.
“This is the first time that Americans are going to be relatively worse off than their parents or grandparents in old age,” said Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research.
Advocates for older Americans are calling on the federal government to bolster Social Security benefits or to create a new layer of retirement help for future retirees. Others want employers and the government to do more to encourage retirement savings and to discourage workers from using the money for non-retirement purposes.
But those calls have been overwhelmed by concern about the nation’s fast-growing long-term debt, which has left many policymakers focused on ways to trim Social Security and other retirement benefits rather than increase them.
The economic downturn exacerbated long-term factors that were already eroding the financial standing of aging Americans: an inexorable rise in health-care costs, growing debt among older Americans and a shift in responsibility from employers to workers to plan for retirement.
The consequence is that the nation is facing a huge retirement savings deficit — as much as $6.6 trillion, or about $57,000 per household, according to a U.S. Senate report.
Using data on household finances collected by the Federal Reserve, the Center for Retirement Research estimates that 53 percent of American workers 30 and older are on a path that will leave them unprepared for retirement. That marks a sharp deterioration since 2001, when 38 percent of Americans were at risk of declining living standards in old age. In 1989, 30 percent faced that risk.
The center’s findings are similar to those recently uncovered by researchers at the New School, the Heritage Foundation and the Senate’s Committee on Health, Education, Labor and Pensions.