There's been a lot of talk of a US retirement crisis lately, and I'm interested in your thoughts on it.
There are three pillars of retirement income: Retirement Accounts like 401Ks and IRAs, traditional pensions, and social security/medicare. Pensions are largely extinct in the private sector as only ~16 percent of employers still offer them. Retirement accounts have pitiful median balances (Note: I'm using net worth here rather than just retirement account balances because I think it's a more accurate measurement of retirement preparedness):
Median and average net worth by age
- Under 35: Median net worth: $11,100 (average net worth: $76,200).
- 35-44: $59,800 ($288,700).
- 45-54: $124,200 ($727,500).
- 55-64: $187,300 ($1,167,400).
- 65-74: $224,100 ($1,066,000).
- 75+: $264,800 ($1,067,000).
Social security will either need increased funds or a ~25% reduction in payout in about 15 years, and medicare will face a similar situation in about 7 years.
Meanwhile, some of the most significant costs facing retirees such as those associated with medical care continue to outpace inflation. An average couple retiring at 65 is expected to face $285,000 (after tax) in out of pocket medical expenses which alone is more than the median net worth of a retirement age couple.
We're going to be forced to make decisions on some of these in a mere half-decade, and the most dominant (to date) voting block is going to be affected - it will force our hand in terms of both timeline and political expediency.
Is this concerning, or do you think it's overblown? What, if anything, should be done about it in terms of policy? Are you making steps to prepare for your own retirement, and do you feel comfortable with how well you've prepared to date?
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