America's looming retirement crisis - MSN Money
After a few years on this type of discussion board, a cycle becomes apparent. The media becomes aware of an "unsolvable problem" or "unstoppable failure", the issue gets lots of hysterical front-page attention, someone writes a ground-breaking research paper or a book, everyone debates the publication, and the problem is eventually declared solvable or the failure is averted. On to the next inevitable crisis!
Take, for example, the 4% SWR. That concept has advanced quite a bit in the 15 or so years since Bengen first brought up the idea. Today you could shake any of us awake out of our hangovers at 3 AM, shine a light in our eyes, and ask us what the SWR is. Some of us would answer "4%!" while a bunch of us would answer "It depends!" but none of us would say "Who the #$%^ are you and what the heck is an SWR?"
These days I think we're at the second attention-getting step with two linked problems: "saving for retirement", and "saving Social Security/Medicare". I'm wondering why the third step hasn't happened yet-- or maybe it's already happened and we just haven't focused our analysis on it.
Let me summarize the article's two issues:
- Workers aren't saving enough money to be able to retire at age 65, so they're gonna keep working until they die.
- There aren't enough workers paying payroll taxes to fund Social Security & Medicare as it is, and people are living so much longer that they're going to bankrupt them through longevity.
When the problems are stated this way, are the solutions apparent? People will retire when they either have enough savings or when they physically can't work anymore. If they're not saving enough today, their longevity might enable them to save enough over another extra decade of work. If they can't work anymore then they're going to cut back their lifestyles to be able to live within their savings, or they're going to find people/businesses willing to shoulder their debt even if default is likely. In any case the problems are "solved". We'd all like for people to save enough money to be financially independent as early as possible, but it's frequently an issue of how much financial pain they're able to endure at different parts of their lives. With their help or in spite of it, the problem is still solved one way or another.
While they're "solving" their retirement savings problem, they're working longer and paying more SS/Medicare payroll taxes. They're sucking down SS benefits at age 62 but they're either losing some SS benefits (because their earned income is above a minimum) or they're paying taxes on their SS benefits (because their earned income is above another minimum). They'll either keep working for many more years (while paying into SS) to build up their savings, or they'll stop working because their health is failing and they'll die earlier. Net result is that less money is paid out by Social Security.
Same with Medicare. People are working longer (and using more of their employer's insurance) while paying more payroll taxes into Medicare. Eventually they go on Medicare but they're still working and paying payroll taxes into Medicare. When their health begins to fail they stop working. They become an immediate (perhaps expensive) burden on Medicare but they may die sooner, "using" fewer Medicare benefits than an ER who lives for another 20 years and then consumes 2-3 years of benefits in progressively declining health. Net result is less money paid out by Medicare. Problem "solved" again.
At some point it should occur to the media or to researchers that longevity means extra money is going to be paid into SS/Medicare. Despite that same longevity, retirement will be no longer or even shorter, and less money may be paid out. I don’t think anyone has actually tried to quantify it yet.
Aside from the occasional comments on this board, has anyone seen any papers or articles claiming that SS/Medicare may be able to turn around due to the superior sustained [-]payroll taxes[/-] efforts of indebted & undersaved Boomers?
After a few years on this type of discussion board, a cycle becomes apparent. The media becomes aware of an "unsolvable problem" or "unstoppable failure", the issue gets lots of hysterical front-page attention, someone writes a ground-breaking research paper or a book, everyone debates the publication, and the problem is eventually declared solvable or the failure is averted. On to the next inevitable crisis!
Take, for example, the 4% SWR. That concept has advanced quite a bit in the 15 or so years since Bengen first brought up the idea. Today you could shake any of us awake out of our hangovers at 3 AM, shine a light in our eyes, and ask us what the SWR is. Some of us would answer "4%!" while a bunch of us would answer "It depends!" but none of us would say "Who the #$%^ are you and what the heck is an SWR?"
These days I think we're at the second attention-getting step with two linked problems: "saving for retirement", and "saving Social Security/Medicare". I'm wondering why the third step hasn't happened yet-- or maybe it's already happened and we just haven't focused our analysis on it.
Let me summarize the article's two issues:
- Workers aren't saving enough money to be able to retire at age 65, so they're gonna keep working until they die.
- There aren't enough workers paying payroll taxes to fund Social Security & Medicare as it is, and people are living so much longer that they're going to bankrupt them through longevity.
When the problems are stated this way, are the solutions apparent? People will retire when they either have enough savings or when they physically can't work anymore. If they're not saving enough today, their longevity might enable them to save enough over another extra decade of work. If they can't work anymore then they're going to cut back their lifestyles to be able to live within their savings, or they're going to find people/businesses willing to shoulder their debt even if default is likely. In any case the problems are "solved". We'd all like for people to save enough money to be financially independent as early as possible, but it's frequently an issue of how much financial pain they're able to endure at different parts of their lives. With their help or in spite of it, the problem is still solved one way or another.
While they're "solving" their retirement savings problem, they're working longer and paying more SS/Medicare payroll taxes. They're sucking down SS benefits at age 62 but they're either losing some SS benefits (because their earned income is above a minimum) or they're paying taxes on their SS benefits (because their earned income is above another minimum). They'll either keep working for many more years (while paying into SS) to build up their savings, or they'll stop working because their health is failing and they'll die earlier. Net result is that less money is paid out by Social Security.
Same with Medicare. People are working longer (and using more of their employer's insurance) while paying more payroll taxes into Medicare. Eventually they go on Medicare but they're still working and paying payroll taxes into Medicare. When their health begins to fail they stop working. They become an immediate (perhaps expensive) burden on Medicare but they may die sooner, "using" fewer Medicare benefits than an ER who lives for another 20 years and then consumes 2-3 years of benefits in progressively declining health. Net result is less money paid out by Medicare. Problem "solved" again.
At some point it should occur to the media or to researchers that longevity means extra money is going to be paid into SS/Medicare. Despite that same longevity, retirement will be no longer or even shorter, and less money may be paid out. I don’t think anyone has actually tried to quantify it yet.
Aside from the occasional comments on this board, has anyone seen any papers or articles claiming that SS/Medicare may be able to turn around due to the superior sustained [-]payroll taxes[/-] efforts of indebted & undersaved Boomers?
