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Will Boomers and Gen Xers be able to retire?
Old 03-12-2014, 08:01 AM   #1
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Will Boomers and Gen Xers be able to retire?

This chart should give pause to BOTH sides of the Soc Sec revenues vs benefits debate (increasing taxes on workers vs slowing the growth of SS benefits). Makes it easy to support or dispute either. Seniors incomes have increased far faster than middle age workers for decades. The author does not project incomes for middle age tax paying workers, but I don't know anyone who is projecting a reversal in the long standing trend for real median incomes (flat).

I still support sacrifice by both sides, a compromise of higher contributions and slowing benefit growth. And that we should be talking about all entitlements, not kidding ourselves by addressing Soc Sec independently.

These things are never simple...

CHART: Will Boomers and Gen Xers Be Able to Retire? | Mother Jones
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Old 03-12-2014, 09:30 AM   #2
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I think I would like to understand a lot more where the data in the chart comes from before making any inferences based on it. In the linked article, the author quotes:
Quote:
Replacement rate" is the percentage of your pre-retirement income that you get when you retire. The typical Depression-era worker had a replacement rate of 95 percent, while the typical Gen Xer is expected to have a replacement rate of only 84 percent. So in that sense, today's workers really are worse off than previous generations

But the chart shows replacement rates well below this. In 1971, the beginning of the chart, the income ratio between middle age and retirees would have been about a third with household income close to 60k and retiree income close to 20k.
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Old 03-12-2014, 09:35 AM   #3
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Interesting article. One thing I didn't see explained (maybe I missed it) is why the 65+ is seeing higher income growth. Maybe this is because it's by household and there are more dual income couples finally reaching 65 and older as time goes on?
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Old 03-12-2014, 10:04 AM   #4
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Originally Posted by growing_older View Post
I think I would like to understand a lot more where the data in the chart comes from before making any inferences based on it. In the linked article, the author quotes:

But the chart shows replacement rates well below this. In 1971, the beginning of the chart, the income ratio between middle age and retirees would have been about a third with household income close to 60k and retiree income close to 20k.
A fair question, and I could not quite pin down the data source for the earlier chart either.

But are you questioning whether or not income for seniors (which includes Soc Sec in good measure with a defined COLA method) has increased faster than income for working-taxpayers? Here's another source using Census Bureau 2011 data. The younger you are, the bleaker it looks, even more so in the past 15 years. The young should pay more to support seniors with full COLA Soc Sec (vs slowing entitlement growth)?

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Old 03-12-2014, 10:36 AM   #5
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From the article,
Quote:
If these projections are right, future retirees are in pretty good shape in pure dollar terms. At the same time, their retirement incomes are going to be a lower percentage of their pre-retirement income than in previous generations.
I think this lower percentage would be expected with what has happened to pensions in the past couple of decades. Much of what we supposedly have as pre-retirement income has to be saved for retirement these days, whether by 401K or otherwise, so people aren't used to spending all of it.
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Old 03-12-2014, 10:50 AM   #6
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W2R said what I was thinking. This idea of 95% replacement income is silly. We pay SS taxes and contribute to 401ks while working - we don't need to replace those things to continue the exact same income (net.)

Add in the fact that many have paid off houses and/or put kids through college already, and no longer have those spending needs, the replacement income can be less, again.

If I needed to replace 95% of my gross working income, I'll never be able to retire.
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Old 03-12-2014, 05:13 PM   #7
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... The younger you are, the bleaker it looks, even more so in the past 15 years. The young should pay more to support seniors with full COLA Soc Sec (vs slowing entitlement growth)? ...
It always riles me up a bit when a Senior gets in front of a microphone on TV, radio, or some public forum to complain about some increased rate for something or other and they start out "I'm a Senior on a fixed income and ...". And I'm wondering - is that 'fixed income' SS? That's COLA'd! Their annual 'raise' could well be higher than many other people.

I'll be a mix, SS, non-COLA pension, and whatever my investments do.

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Old 03-12-2014, 06:25 PM   #8
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Originally Posted by ERD50 View Post
It always riles me up a bit when a Senior gets in front of a microphone on TV, radio, or some public forum to complain about some increased rate for something or other and they start out "I'm a Senior on a fixed income and ...". And I'm wondering - is that 'fixed income' SS? That's COLA'd! Their annual 'raise' could well be higher than many other people.



-ERD50

My hot button gets hit when some supposedly victimized person moans and groans that they lost 50% of their money in the last bear market while ignoring the huge subsequent bull market that has left investors better off than before the bear.
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Old 03-12-2014, 06:37 PM   #9
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Originally Posted by ERD50 View Post
It always riles me up a bit when a Senior gets in front of a microphone on TV, radio, or some public forum to complain about some increased rate for something or other and they start out "I'm a Senior on a fixed income and ...". And I'm wondering - is that 'fixed income' SS? That's COLA'd! Their annual 'raise' could well be higher than many other people.

I'll be a mix, SS, non-COLA pension, and whatever my investments do.

-ERD50
True, to a point. Since beginning SS in 1999, our increases since have come to a compounded total of 26.3%... Inflation during the same period is 40.4%. Very grateful to have been there during the higher years, but the past 5 years have not been quite as good, falling far short of the actual gov't inflation rate of 9%.

Chained CPI doesn't look to help the situation in the future.
Many of us, by choice, to be sure, have become more conservative in investments... and keeping to "safe" CD or Money Market Rates, and have not shared in the market growth. (Remember that the median household net worth of those over age 65 is just about $200,000, and that includes all assets including house, cars etc.) (Those with a $1 million total net worth are in the top 8%).

No complaints, but most seniors don't have a lot of money to be invested, thus the common comment about "fixed income"... as the current under 2% COLA over the past 5 years, and the "safe" money market rates, hardly keeps up with the real inflation rate of 9%..
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Old 03-12-2014, 07:28 PM   #10
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Many of us, by choice, to be sure, have become more conservative in investments... and keeping to "safe" CD or Money Market Rates, and have not shared in the market growth.
Certainly, the war on savers low interest rates on savings is a more justifiable subject to gripe about.
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Old 03-12-2014, 07:52 PM   #11
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Originally Posted by Chuckanut View Post
My hot button gets hit when some supposedly victimized person moans and groans that they lost 50% of their money in the last bear market while ignoring the huge subsequent bull market that has left investors better off than before the bear.
Yep, that's another one.


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Old 03-12-2014, 10:05 PM   #12
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It's worth pointing out that the original graph doesn't mean much without seeing relative populations in each cohort. That's not to say everything is fine, rather that graph in itself does not spell doom.
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Old 03-13-2014, 06:33 AM   #13
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It's worth pointing out that the original graph doesn't mean much without seeing relative populations in each cohort. That's not to say everything is fine, rather that graph in itself does not spell doom.
Right. It also uses household income, which means the decline in labor force participation will be affecting the younger cohorts more than the older ones. I think the article is confusing.
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Old 03-13-2014, 06:51 AM   #14
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Right. It also uses household income, which means the decline in labor force participation will be affecting the younger cohorts more than the older ones. I think the article is confusing.
Yep. In terms of seeing the future impact on Social Security (and Medicare) revenues, it would be more interesting to see *earned* income, not all taxable income since SS and Medicare taxes are only levied on earned income.
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Old 03-13-2014, 06:59 AM   #15
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Since beginning SS in 1999, our increases since have come to a compounded total of 26.3%... Inflation during the same period is 40.4%.
Are you sure?
Looking at my military retired pay (which also uses a CPI COLA), my current amount is 43.7% higher than the 1999 amount.
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Old 03-13-2014, 09:47 AM   #16
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My parents' generation used the phrase "old people on fixed incomes" while the current term of art is "seniors," but it's the same bid to sound poor.

Why they don't say "small incomes" is beyond me. Most people have "fixed incomes" - fixed at whatever your salary happens to be, and sometimes "frozen incomes."

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Originally Posted by ERD50 View Post
It always riles me up a bit when a Senior gets in front of a microphone on TV, radio, or some public forum to complain about some increased rate for something or other and they start out "I'm a Senior on a fixed income and ...". And I'm wondering - is that 'fixed income' SS? That's COLA'd! Their annual 'raise' could well be higher than many other people.

-ERD50
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Old 03-13-2014, 09:58 AM   #17
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Quote:
Are you sure?
Looking at my military retired pay (which also uses a CPI COLA), my current amount is 43.7% higher than the 1999 amount.
You're probably right...I couldn't find an easy way to to the calculations, so did it the hard way, with a calculator... old fingers subject to many mistakes...
speling isn't too good, either.
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Old 03-13-2014, 10:30 AM   #18
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My parents' generation used the phrase "old people on fixed incomes" while the current term of art is "seniors," but it's the same bid to sound poor.
I would guess that the "fixed income" phrase came about when a lot of retired people were mainly relying on defined benefit pensions, which had no COLA.
So it would have been accurate at that time.
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