It was probably inevitable that we would have a “retirement crisis” as hordes of baby boomers (people born between 1946 and 1964) sprint and stumble into their “golden years.” But it’s a fake crisis, even though it’s already becoming a staple of journalism and politics. It presumes that most Americans can’t afford to retire comfortably. Not so.
It’s important to get this right. If we don’t, we risk harboring a fundamentally mistaken and misleading view of the elderly’s well-being. This has political and social consequences in the real world, where more government spending on the old often comes at the expense of the young.
Superficially, the case for a retirement calamity seems strong. A recent Gallup poll found that about half of Americans do not expect to be financially comfortable when they retire, a dramatic increase from one-third when the survey was first taken in 2002.
Look closer, however, and the picture changes dramatically. The pessimistic appraisals apply to non-retirees. As people stop working, their views of their retirement security improve sharply.
The same Gallup survey found that three-quarters of retirees ages 65-80 (77 percent) judged they had enough money to live comfortably. When this group was interviewed in 2002 before retiring, only about half felt they would have adequate income.
What explains the huge confidence gap between retirees and non-retirees? Good question. More research is needed. It may be that when people retire, they discover that their financial needs are less than they had supposed. They don’t have work expenses (commuting, new clothes, restaurant meals), or they’re more careful in their spending.
Post-retirement incomes may also exceed expectations. In a recent op-ed for Real Clear Markets, economist Gary Burtless of the Brookings Institution rebuts the notion that most elderly are poor. “It’s hard to see much evidence for the scary headlines [about the impoverished elderly] when we examine the relevant income statistics,” he writes.
One of those relevant statistical series is the official poverty rate, which covers wages, salaries, dividends, interest and Social Security. In 2019, the poverty line is $25,750 for a four-person household. People below the poverty line are officially counted as poor. In 1959, about 35 percent of the 65-plus population was classified as poor, the highest of any age group, notes Burtless.
By 2017, the rate was 9.2 percent. This was lower than the rate “among nonaged adults . . . [and] substantially lower than the poverty rate among children.” Burtless attributes the gains to “liberalized Social Security benefits, broader participation in workplace retirement plans, and higher savings.”
The Census Bureau also calculates the median and average household incomes by age. Again, the elderly do much better than average, according to Burtless. From 1979 to 2017, average real income for households headed by someone 65 and older grew by 82 percent, more than twice the 37 percent of households under 65.
In another comparison, Burtless finds that elderly households have moved up the income distribution. In 1979, about 28 percent of elderly households were in the poorest fifth of households; by 2016, that had dropped to 13 percent. For the middle three-fifths of households, the share was 62 percent in 2016, up from 54 percent in 1979. As for the richest fifth of households, it contained 25 percent of elderly households in 2016, up from 18 percent in 1979.
Taken in isolation, any of these social statistics raises major technical and political questions. However, taken together, they create a powerful and coherent picture of the elderly. They refute the stereotype that most of the elderly are poor and are living on the edge. Some are; most aren’t.
We need to keep that in mind as we ponder the future. By and large, older Americans have been treated very well. They have special problems of aging, including declining health and reasonable fears that, even if they have saved amply, surprise events (serious illness, financial losses) may upset their plans.
But we need to remember that if we provide special treatment for the old, we are almost certainly shortchanging the young and middle-aged.
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