Here is a new PolicyNote from The New School’s Schwartz Center for Economic Policy Analysis. The punchline is truly scary:
“Without a universal supplement to Social Security, many of the 24 million workers ages 55-64 will face declining living standards or poverty in just 10 years. One-third of older workers have neither retirement savings through a 401(k) or IRA, or a defined benefit (DB) pension. Overall, the median account balance of workers approaching retirement is just $15,000. The median account balance for those with retirement savings is just $92,000.”
Think about the loss of demand for goods and services that results from this lack of financial resources? Will a majority of these 24 million be able to stay in their homes? That is highly unlikely to happen in states with high property taxes, even before considering that the deductibility of property taxes may be eliminated or significantly reduced for Federal Tax purposes.
So, what happens to these millions of folks? Do they:
- Fall onto the welfare ranks?
- Sell assets (homes, cars)
- Move in with family members?
- Borrow from family, friends, credit cards, loans, etc.
- Engage in criminal activity?
- All of the above
The potential exists for all of the above to become the standard operating procedure for these individuals. You may scoff at these suggestions, especially the one related to criminal activity, but desperate people don’t always think rationally. Do we really want our senior citizens to live a life without dignity? Do we want them missing meals, doctor appointments, while skimping on other essential items because we didn’t prepare them appropriately for life after work?
For those in our society who claim that we can’t afford defined benefit plans for the masses, I would argue that we can’t afford to add millions more to the welfare ranks. It is far better to try to pre-fund a retirement benefit that will provide a monthly supplement to Social Security than it is to have a massively bloated welfare system.