Retiring Americans face shrinking funds to retire

While the US stock market has recovered long ago from the 2008 financial crisis those Americans 50-64 nearing retirement have yet to see their situation improve.

Indeed, a Congressional Budget Office report just released shows that US median family wealth for those between 50-64 has gone down. In 2007 it was around $250,000. By 2010 this had declined to about $200,000. By 2013, instead of wealth increasing, the decline continued to around $150,000. In merely six years, the median family income of the age group dropped by 40 percent. Americans 65 and older saw a smaller drop of around 10 percent.

Many middle-aged people have a considerable amount of their wealth tied up in their home. As home prices collapsed, their total wealth also declined. With the improvement in house prices and the economy since 2013, the situation may have improved somewhat and the economy has been improving as well. Even so, there are millions of Americans nearing retirement who may not have sufficient funds to avoid falling into poverty. From 1995 to 2007 median wealth for Americans in the 50-64 bracket had been edging upward partly due to increasing house prices.

From 1989 to 2007 median wealth for high school graduates went up slightly but gains were lost during the 2008 financial crisis. For those lacking even a high school degree the numbers are even worse. The bottom 25 percent in wealth distribution went from a negative amount of $2,000 in 2007 to minus $13,000 in 2013.

To some extent, the situation is alleviated by Social Security benefits and pension plans but this may not be enough. Senator Bernie Sanders supports increasing Social Security benefits. Republicans suggest means-testing and then using the savings to target low-income seniors. Another conservative strategy would be to exempt seniors from the payroll tax for those reaching the retirement age allowing them to keep more of their pay and providing an incentive to work longer. The US needs to develop policies to prevent the coming wave of retirees from falling into poverty or having to continue working past the retirement age to keep from falling into debt. Many Canadian seniors also lack sufficient funds to retire comfortably.