THE FUTURE OF RETIREMENT IN U.S
Introduction
Retirement involves a drastic change in lifestyle. A person moves from formal employment, and this means there is no monthly salary that the person was accustomed to. Also, a person’s social circle changes, and there is a lot of free time for one to pursue their interests. With people earning a higher income than their previous generations, retirement can be a smooth ride for some people. However, not all people earn high salaries, and not all generations have been making the same salary. Saving habits determines a person’s lifestyle and standards of living after retirement since other benefits such as social security cannot be relied on due to uncertainties and the limited amount that is given. This research paper examines the future of retirement in America.
Different Generations and Retirement
Every single day 9,000 Americans are turning 65. In 2015, there were 48 million Americans aged above 65 years, which is 18% more than the 2010 population of the same age group. This number will continue to increase, being projected at 74 million by 2030 (Johnson & Smith, 2016). The baby boomers, born between 1946 and 1964, are entering the retirement age. With the power they held in the society and economy, there will be changes to both retirement patterns and the economy. Different generations will be impacted differently by retirement, making the future of retirement dependent on generations. Baby boomers, for instance, are expecting a long-life expectancy and needs more wealth for retirement (Gale, 1997). Also, the Baby Boomers have had stable jobs giving them money to save for retirement.
The Baby Burst and Xennials are still in the corporate world, earning more income than the previous generations and saving a lot of money. They are the managers and CEOs of corporations, and the money they are making will be enough to sustain them in their retirement. Also, the two generations have more education than all previous generations, and this will lead to more working life for them, retiring late in life. For those working in low-wage jobs, they have social security and some savings from their salaries. They still have time to make retirement investments for the years they have left before retirement.
Millennials are entering their forties this year for those born in 1980, and they have decades before retirement. One characteristic of Millennials is the opportunities they have in the workplace and the world. They are the majority in all the growth sectors, such as finance, technology, and health. They are earning more money while still young, and although they have poor saving habits due to their lifestyles, they have decades to prepare for retirement. The years the millennials have before retirement can give them enough time to save and invest. Also, for millennials, they have employers plans that, when combined with social security and their savings, they can still have a decent life during retirement.
Factors that will Affect Retirement in Future
Despite the generation gaps, some common factors that will affect retirement for all generations include the level of education, the income of individuals, marital status, how much debt a person has been accumulating, and type of employment, which affects the pension from employers. Also, a person’s employment will affect how long one will stay in the profession before they retire and how fulfilling the work is. Changes in law will also come into play affecting the future of retirement. A change in medical cover, for instance, can mean people will have to pay for health from their pockets. Other changes, such as universal health cover for Americans, if implemented, can reduce the burden of medical expenses, leaving people with more money for investments (Kliff, 2019). Social security is also facing uncertainties and needs changes to be sustainable in the future; otherwise, a dependent on social security may be catastrophic for individuals who have no other savings. Finally, the cost of living will affect retirement plans in the future.
The future of retirement in the U.S
There will be a decrease in standards of living for retirees in America. 20% of retirees, both married and single, rely on social security for their income (Ramsay, n.d.). With the increase in population for those above 65 years, social security will be stretched, with the imbalance being offset by raising taxes or cutting the benefits. However, both methods are impractical. For a start, the benefits that retired Americans get is not much, with data indicating the average amount a retired person gets is $ 1, 461 per month, implying a reduction will cause the people to suffer (Buckley & Gunnion, 2019). Raising taxes is also not a solution since people are already paying too much in tax. Therefore, social security faces uncertainty, and the elderly relying on social security will suffer in the long run. With the little they will be having from social security, the retired people will have low standards of living.
People nearing retirement are using their income to pay debts. Research has shown that people between 55 and 64 years spend 22% of their income on repaying debts (Ramsay, n.d.). With the payment of taxes and bills, the group is saving little in the years before their retirement. Such people are the ones who end up relying on the same social security that is facing a lot of uncertainties, making their future not only uncertain but also painful without personal savings.
Data from federal reserve states that 40% of those nearing retirement do not have a retirement account, and those who have it have a median balance of $ 100 000 (Ramsay, n.d.). This indicates that fewer people are prepared for retirement and the period will be painful without much savings to cater for their old age, since what they have by their retirement will not be enough.
Medical expenses for retired people will increase, and for those who will require nursing care, it will be more. Even with medical insurance, medical expenses will take a toll on the retired people, and this will stretch their already little pool of savings. There will be a problem in access to medical care for the elderly in the future. This is due to an increase in the treatment and care that they need.
Males will be affected negatively than females by retirement in the future. In today’s world, women are accumulating more money on their own and having more money in their employer’s retirement plans. This will give them financial security in their retirement. Also, marital status will play a part in retirement, with single people having more economic burdens than their married counterparts. With married couples sharing expenses, they will have reduced their expenses as compared to a single individual (Fox Business, 2013). Also, a couple will have better social security terms than an individual and employer-paid pensions for two individuals (Livingston, n.d.). However, there are high divorce rates in America apart from the younger generation (Gold, 2018). A good number of people will end up being single by retirement. Most people entering retirement will, therefore, have a lot of financial burdens.
With more education, retirement will not be burdensome financially. Many people today are going for advanced degrees, causing them to wait longer before they get married and also having more educational debts in the early years of their careers. However, the individuals end up having a career that offers more income, giving them enough money to save for their retirement. Also, with a good job, the career provides a positive motivation to remain in the workforce longer, ending up saving more and reducing the reliance on social security (Newman, 2019). However, less than half of Baby Boomers went to college, and only 16% have a 4-year college degree (U.S Bureau of Statistics, 2019). Such statistics show that soon, there will be a problem with retirement since it’s the Baby Boomers that are entering retirement. In the long run, other generations will have more money for retirement from their savings and also from employers’ pensions.
Retirement will be harsh for the low-wage workers. People who work in jobs such as firefighters, drivers, security personnel do earn much, and with the burden of bringing up a family, they do not save much (Butrica & Toder, 2008). Some of these jobs are stressful and physically exhausting that the individuals prefer to retire due to exhaustion. However, they do not have much savings, and their retirement will be a dependence on medical cover and social security (Butrica & Toder, 2008). Also, some of the low-income earners have gone through a divorce, some providing for support to another family. Others cannot rely on their divorced spouse due to their low incomes. This makes their retirement life unbearable that they have to search for other low paying jobs to sustain themselves in their old age.
Some people earn a living off the books, working for weekly wages and on small contracts. These groups of people have no accrued social security and have no employment benefits. Such people will be facing a hard time in the coming years since they have to depend on family for support. Even with family support, the individuals will still face financial problems since the families have other dependents who are relying on them.
With the rising cost of living, increase in college tuition fees, many people are finding themselves using much of their salaries on recurrent expenditure and their children’s education. Such expenses reduce savings for individuals, making them have less money for retirement or forcing them to make savings later in life. One advantage of retirement is that the cost of living is not high since the majority of people have already finished taking care of their children, though debts are a burden for those with repayments.
Conclusion
Retirement in the future will be a burden to many people, especially for people struggling financially. However, retirement depends on individuals, their level of education, their previous salaries, how much savings they have accumulated, and marital status. Higher levels of education mean higher income, thus more savings. Low levels of education mean the opposite. other factors such as social security are hard to predict; with more people retiring, the system will be stretched, and changes are needed. Otherwise, people depending solely on social security will suffer.
References
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