The National Institute on Retirement Security is ringing the alarm on the upcoming silver tsunami.
Most Americans will not have enough money for a financially secure retirement, and they are worried about it, was the testimony of Dan Doonan, executive director of the National Institute on Retirement Security (NIRS), at a hearing before the Senate Health, Education, Labor, and Pensions (HELP) Committee.
Moving away from pensions and the upcoming “silver tsunami” (the term for the huge number of people approaching retirement age) contribute to a perfect storm of retirement trouble.
“We’re encouraged that the Senate HELP Committee is taking a hard look at the retirement savings shortfall facing far too many Americans,” Doonan said. “The data clearly suggest that we need to rethink our nation’s retirement infrastructure because the current system is leaving the middle class behind. Finding solutions to ensure Americans have access to pensions, defined contribution plans, and Social Security is the best path forward for employers, employees, and the economy.”
In his testimony, Doonan detailed the scope of the retirement savings shortfall.
NIRS research noted that for Generation X, a generation quickly approaching retirement and the first to retire largely without pensions, the bottom half of earners have only a few thousand dollars saved for retirement. This means most Gen Xers are not even close to having enough savings to retire. And when Americans don’t have adequate retirement income, they are more likely to fall into poverty or turn to public assistance programs or families to make ends meet.
80% Unable to Sustain Financial Shock
A study by the National Council on Aging (NCOA) and the LeadingAge LTSS Center at UMass Boston finds that 80% of older Americans (47 million) continue to be unable to sustain a financial shock such as needing to pay for long-term care services and supports (LTSS) or the loss of income due to divorce or widowhood.
Many seniors are struggling with the rise of inflation, the lack of an extensive security net, and the rising cost of medical costs, leading most boomers to spend more than they can afford.
The 80%: The Continued Toll of Financial Insecurity in Retirement” Study looks at the total net value of all assets—housing, retirement accounts, income, and savings—of people age 60 and older by income quintiles and compares that with the cost of two years of in-home long-term care services and nursing homes.
“It is unacceptable that nearly all older Americans are one crisis away from plunging into poverty after working their entire lives and often saving a nest egg that is then wiped out by the cost of care,” said Dr. Susan Silberman, NCOA Senior Director, Research & Evaluation. “This is a snowballing crisis given that the older population is growing rapidly. The cost of care is staggering, and older adults’ resources are insufficient.”
Boomers Are Spending More Than They Can Afford
Increased spending on retirement is also a huge problem. Results from the 2022 Spending in Retirement Survey published by the Employee Benefit Research Institute (EBRI) found that retirees were spending much more or a little more than they could afford in 2022 (17% in 2020 vs 27% in 2022).
Inflation appears to be a major driver of the misalignment between expectations and reality, a double-edged sword that undoubtedly increases actual spending but also reduces spending, likely out of a desire to protect future purchasing power,” explained Bridget Bearden, Ph.D., research and development strategist, EBRI.
Read More:
- Boomers Are Spending More Than They Can Afford, Report Says
- Inflation Is Still Beating Our Paystubs- Here’s What to Do About It