By: Russ Kamp, Managing Director, Ryan ALM, Inc.

There has been much written during the last week about the current state of the US retirement industry. This follows testimony in Washington DC that highlighted many of the current issues related to retirement security or lack thereof. One of the statistics that grabbed my attention is the fact that >50% of Americans aged 65-years-old or older are “living” on <$30,000/year. That is as disheartening a fact as I’ve ever seen.

Where in the US can one afford to live on such a meager annual sum? Worse, without Social Security roughly 38% of the senior population would be living below the poverty line, that is currently (2024) defined by the Department of Health and Human services for all contiguous 48 states, Puerto Rico, the District of Columbia and all U.S. territories, at $15,060 (one-person household). It goes all the way up to a whopping $20,440 if you are fortunate to have a life partner living with you. Again, how can most live on this meager sum?

Social Security currently pays an average annual sum of just $21,384/year or just $1,782/month. Given that the average monthly housing rental is $1,372, that doesn’t leave one much for food, transportation, healthcare, insurance, or even TV viewing since everything these days is a pay-to-watch service, and that happens only after you’ve had to pay for the internet! One can almost forget about staying in their house, since property taxes continue to ratchet higher and higher, especially if you live almost anywhere on the East coast. For instance, the average property tax in NJ is now roughly $8,600/year with many communities seeing double and triple those rates.

This lack of income in retirement is forcing a larger percentage of those 65-years-old and up to seek employment in their “golden years”. According to AARP, some 20% of the Senior population is now gainfully employed. That figure was 10% in 1985. If you are fortunate to work in a white collar job, the opportunities are more plentiful. However, for those that have spent a lifetime engaged in more physical labor you can almost forget about participating during your sunset years.

I’ve written chapter and verse about the demise of defined benefit plans and the impact that trend was going to have on the average American worker. The use of DC plans in lieu of DB plans is poor policy. It isn’t working. The average American is not saving nearly enough to replace a meaningful portion of their income in retirement. This is and will continue to be a major source of concern as it has long-term implications for the states in which they reside. The social safety net that will be used to support these individuals with housing, medical, food, transportation, and other daily needs is already stretched. “A 2023 Pew Charitable Trusts study suggests that as more households with older Americans become financially vulnerable from 2021 to 2040, state governments will take a $1.3 trillion hit.” (Business Insider)

The retirement industry is in poor shape. Others will suggest that it isn’t, but the facts don’t lie. Too few Americans have access to a retirement account – there is not an age group that has participation at >60% – and for those that do, too many are not able to contribute a meaningful and appropriate sum. The lack of a crystal ball to help determine longevity and investment acumen combine to make managing one’s “retirement” more challenging. Please let’s stop pretending that it doesn’t.