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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsReuters: Why you may retire in poverty
http://www.reuters.com/article/2012/08/07/us-column-miller-poverty-idUSBRE8760VW20120807Why you may retire in poverty
By Mark Miller
CHICAGO | Tue Aug 7, 2012 11:50am EDT
(Reuters) - Are you going to retire in poverty?
....
As recently as 1998, 52 percent of Americans over age 60 received income from a defined benefit pension, according to a new study by the National Institute on Retirement Security (NIRS). By 2010, that figure had fallen to 43 percent. In the private sector, the decline has been more dramatic - down from 38 percent in 1979 to 15 percent in 2010.....poverty rates were nine times greater in 2010 in households without defined benefit pension income. Pensions resulted in 4.7 million fewer poor or "near poor" families and 1.2 million fewer families on various forms of public assistance.
....
While Washington debates whether we should sacrifice Social Security benefits to deficit reduction, most people do not realize benefits already have been cut substantially. That occurred in the reform package passed in 1983, which set in motion a gradual increase in the age when seniors could file for full benefits - the so-called Normal Retirement Age (NRA). The NRA is rising from 65 to 67 for people reaching that age in 2022. At that point, monthly benefits will be about 13 percent smaller than if the retirement age had remained at 65, according to the National Academy of Social Insurance.
....
Likewise, seniors have seen their home equity drained by the housing crash. The AARP Public Policy Institute reported recently that 3.5 million homeowners over age 50 are "underwater" on their mortgages, meaning they owe more than their properties are worth. Seniors are carrying more debt into retirement and have less flexibility to tap home equity to meet expenses.
....
The Obama administration is pushing a set of policy changes aimed at encouraging use of commercial annuities within workplace accounts as a way of plugging the guaranteed income gap - an idea that can work for those who have actually accumulated savings....
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Marrah_G
(28,581 posts)
woo me with science
(32,139 posts)"The only viable solution for seniors without savings will be to work longer...if you can pull it off..."
Lex
(34,108 posts)That's part of the problem too. Sigh.
Marrah_G
(28,581 posts)maybe some day a relative will leave me some money.....
nichomachus
(12,754 posts)when they fire you for being too old
SheilaT
(23,156 posts)because there were still enough people living who'd retired a couple of decades earlier with a defined benefit pension. They started disappearing very rapidly somewhere in the late 70's.
Odious justice
(201 posts)"You might retire in poverty if you contributed to a municipal pension.."
Ugh. No, still depressing.
xchrom
(108,903 posts)
leftstreet
(40,680 posts)Up is down
woo me with science
(32,139 posts)It takes a Democrat to privatize Social Security.
How right you are.
suffragette
(12,232 posts)Members of Congress are eligible for a pension at age 62 if they have completed at least five years of service. They are eligible for a pension at age 50 if they have completed 20 years of service, or at any age after completing 25 years of service. The amount of the pension depends on years of service and the average of the highest three years of salary. By law, the starting amount of a member’s retirement annuity may not exceed 80 percent of his or her final salary.
http://www.factcheck.org/2007/12/congressional-pensions/
Mind you, I don't begrudge them their pensions. I just wish such reasonable plans were more the standard here than the exception. And I do have issues with members of Congress who benefit from this added security advocating for slashing the meager Social Security amounts and raising age limits for the rest of us.
Raster
(21,010 posts)..our last years in dire poverty. Congress stacked the deck against the human citizens in favor of corporations. Congress spent money on needless, illegal wars like drunken sailors. Congress killed legislation that could have broken the monopolies of Big Money, Big Pharma and Big Insurance.
Oh yes, I say take away their lavish pensions. Take away their high-quality, low-cost heath care for life. Take away all their perks. It is time Congress got a major dose of their own medicine.
enough
(13,760 posts)getting their VERY good pensions and healthcare, they need to consider the big picture. Otherwise, CUT THEM OFF government payments of any kind.
Raster
(21,010 posts)...depend on our government to do the right things. Congress serves a master that is NOT the American voter. We are just minions and malcontents. Our children are raw materials for the war machine. Our country's resources are being privatized at an alarming rate. The geographic core of our country and continent is becoming a dust-bin desert right before our eyes, and still our Congress refuses to act. The American Middle Class that made this country great and fueled it's growth is being dismantled to line the pockets of the rich. The 1% and their vampire-like entities feed upon us, and our government not only refuses to act in our benefit, but aids and abets the monsters doing us harm.
Congress get the "big picture"? Please, don't hold your breath. Congress already considers the big picture, and unfortunately, we are not part of it.
woo me with science
(32,139 posts)Have we had enough yet, America?
tilsammans
(2,549 posts)The only "big picture" Congress understand is BIG MONEY. 
magical thyme
(14,881 posts)The average of their 3 highest years of earnings? Are you effing kidding me? 
And we get our 35 highest years of earnings.
We didn't pay them to help the 1% wreck the economy, outsource our jobs, steal our savings, etc.
yellowcanine
(36,792 posts)cbdo2007
(9,213 posts)You'll be just fine in retirement. That should be everyone's number one financial goal even if it takes you until retirement to get there.
Le Taz Hot
(22,271 posts)Many of us have gotten out of debt and lived within our means. While we've worked most of our adult lives and saved, because of the economy many of us were wiped out. That includes savings and pensions (if there ever was one). We're not going to be in poverty because of OUR actions, we're going to be in poverty because our government took the SS monies that were SUPPOSED to be set aside and used it in the general fund; i.e., SPENT IT.
I want to remind everyone that in the 1980's, the contribution to SS was increased supposedly because so many of us boomers were going to retire en masse. Additionally, in the 1970's women began entering the workforce in record numbers which also increased the contributions to SS.
Our greatest assets (retirement and home equity) were wiped out in the last banking scheme for which NO ONE has been convicted or even indicted.
Even after they'd raided OUR SS and saw there was going to be a problem, they continue to refuse to remove the ceiling (too afraid they'll be accused of "raising taxes"
, refused to put SS in a lockbox (much as Al Gore wanted to do and what they originally promised they'd do) and then Obama pulls this SS tax holiday that is STILL going on, and we're screwed not by OUR action but by theirs.
Many of us planned, and saved, and lived within our means and did all the right things and we're STILL looking at poverty at retirement.
KarenS
(5,050 posts)cbdo2007
(9,213 posts)in retirement.
Just doesn't have the same ring to it.
TwilightGardener
(46,416 posts)that eat up their savings.
RebelOne
(30,947 posts)My car is paid and I have no credit cards. Plus, I live in a mobile home, which I own and I only pay lot rent. I am collecting social security, but it is not easy paying the bills, which include utilities, phone and Internet, and car and home insurance. And my Social Security check is fairly good, but it just covers the essentials. I have some money in savings, but that money is only for emergencies because it is going to have to last me for a long, long time.
I did not choose to retire. I was working until I was 70 years old, but the company downsized and eliminated my job in 2010. I wanted to work longer to build up more money in my 401K, but I was forced into retirement. I am not even bothering to look for another job, and I sure as hell do not want to be a WalMart greeter.
dixiegrrrrl
(60,160 posts)We are in same boat..no debt, low housing costs, retirement income covers the basics, and we have no extras.
And every week the cost of living increases one way or the other.
So soon, our "just making it" budget will be eaten by inflation.
RebelOne
(30,947 posts)I went to the supermarket yesterday and it seems as if the prices have doubled. I may be living on rice and beans soon.
riderinthestorm
(23,272 posts)It also accounts for a whopping percentage of family debt even without going into bankruptcy.
You must be joking when you throw off a line like that.
woo me with science
(32,139 posts)maindawg
(1,151 posts)I have lived in poverty most of my adult life. Its not so bad , as long as you get to be alive, what are you complaining about? SS has to be reformed, They need to raise the lid, and there should absolutely be means tested benefits. Rich people should not collect SS. Sorry, its not a pension program. Its supposed to protect the elderly from being destitute. When I see old people driving Cadillacs , living the life of luxury I see welfare queens.
Look, you are responsible for you. Live within your means. Life is for living. Its not a game to see who can scam the most excess , own the most crap, and leave the biggest mess.
I will be happy with my 900 dollars a month when I finally live long enough to be eligible. Until then, I can take care of myself just fine.
RebelOne
(30,947 posts)You will definitely collect more than $900 a month. I know I do.
hay rick
(9,605 posts)Median incomes have been declining which in turn has decimated the savings that would otherwise go into defined contribution plans. From the article:
Just 14 percent of households report they expect to have enough money to live comfortably in retirement, according to the Employee Benefit Research Institute. Sixty percent of households tell EBRI that the total value of their savings and investments - excluding their homes - is less than $25,000.
The disappearing defined benefit pensions are disappearing both in number and in solvency. A recent story here: http://www.businessinsurance.com/article/20120709/NEWS03/120709911
Before the housing/financial crisis, static and declining incomes were disguised by consumption based on borrowing financed by inflated home equity values. That option has been exhausted. Faced with a recalcitrant Congress, the Obama administration turned to the payroll tax holiday as a means of propping up demand. So now we are depleting Social Security's Trust Fund to compensate for inadequate incomes. We are eating our seed corn.
The approaching "fiscal cliff" should provide a lovely bipartisan opportunity for the continuing attack on American's incomes and retirement opportunities.
woo me with science
(32,139 posts)We never hear about the wages and benefits of those jobs.
It's not a recovery. It's a restructuring. And we are the orchestrated losers.
tclambert
(11,193 posts)Fred Thompson, please explain.
woo me with science
(32,139 posts)the point is that we have now placed people in a position where it is considered normal to have to exhaust everything you own before you die, so that you can pass nothing on to your children.
I spent a sad afternoon caring for an elderly relative recently, and got to see the commercials that air through game shows and daytime TV. It was truly depressing. They were all either ads for fly-by-night professional schools for profit and to sink people in student loan debt, or ads for services to liquidate or exhaust what little assets people may have left: reverse mortgages, title loans, cash for gold, liquidate your annuities, liquidate your legal settlements, etc., etc., etc...
The American public is being bled dry of any savings or assets whatsoever.
NNN0LHI
(67,190 posts)When I started out I figured if I could just prevent myself from becoming a burden to my children that was the best gift I could give them.
And I never will be a burden on them either so I have succeeded.
Don
woo me with science
(32,139 posts)live so that you have something in reserve. Whether you plan to leave it to your children or bury it in a park, the point is that more and more people have NOTHING left over...or they are crushed by debt. Life happens. Medical emergencies happen. You become a "burden" despite your best intentions. The restructuring that the one percent have perpetrated on our financial system, our commerce, our taxation, our wages and cost of living, our medical and banking systems has driven millions into poverty. It is unconscionable, in a country with the wealth of the United States, that living and then dying penniless are becoming so commonplace.
Digit
(6,163 posts)of people are some of the lowest of the low. I guess I was old school and believed people had ethics. How actors can promote things which are designed to be detrimental to others who are alrepady suffering is beyond my comprehension.
I also believe that our public servants who hold elected office and similar positions need to tighten their belts like the rest of us and scale down their medical coverage, deductibles and pensions and any additional benefit that I may have omitted. After all, it is the American taxpayer who is funding these benefits and since we have been impacted, why shouldn't THEY?
NNN0LHI
(67,190 posts)Last edited Wed Aug 8, 2012, 07:10 PM - Edit history (1)
And closing costs on a reverse mortgage are about $8000 dollars. So if someone doesn't have a lot more than $8000 worth of equity it doesn't work.
Don
BeyondGeography
(41,101 posts)Defined benefit pensions have been deleted from the corporate menu going on about 30 years now.
I remember starting out in the 80s when the 401K switch was happening and saying, fuck this, give me 30-40K or so guaranteed every year when I retire plus SS and I'll manage. Now people are sitting there with 25K in the 401k and no defined benefit pension. Of course it's a disaster, Diane...
virgogal
(10,178 posts)the house is worth.
I assume a good portion of them bought about 20 or more years ago and the property would be worth more than it cost,assuming no 2nd mortgages or loans were taken on the equity.People that bought just before the bubble burst are the ones in trouble.
My generation,in our 70s,made quite a bit on our property.Quite a bit.
I do wonder how people are going to get by without pensions though. Mine isn't large,but I couldn't get by without it,and my benefit package is superb.
Only 1 of my 6 kids will get a pension. He's in a union.
What a mess.
KarenS
(5,050 posts)We are well past 50 and underwater,,,, Bought a house 5 years ago.
Your generation will be the last to "retire".
but don't assume that those past 50 have owned homes for 20 years,,,, Folks still divorce ~ folks still remarry ~ folks still relocate ~ even after age 50.
virgogal
(10,178 posts)riderinthestorm
(23,272 posts)from just 5 years ago. Right now, with the improvements we've made, we're underwater with what our mortgage is vs the appraised value.
I don't think you can assume anything about anyone's property in these days.
NNN0LHI
(67,190 posts)Something doesn't sound right with this story. Kind of like you are leaving out some very important details or something.
My wife and I purchased our house about 23 years ago and have taken similar hits as you in appraised value but we aren't close to being underwater. It will be paid for in less than two years.
Don
riderinthestorm
(23,272 posts)so this isn't your "typical" situation.
We're not going anywhere so paper losses and gains aren't meaningful to us but yup, after the hundreds of thousands of dollars in improvements and the initial purchase price, with our current mortgage amount, we are valued at less than what we owe.
Farms can be weird like that. We have a working farm so we've done things that improve our business but are also completely personal in facilitating our daily lives. For example: paying $60k to completely upgrade all the water lines to the house and barns and installing a new well pump is both personal and business but was a necessity in order to create a more functional farm and stop the daily water line breakages we experienced when we first purchased the place. A water line breakage to the mare barn means the whole place has no water. Same thing with electric lines as another example - we discovered the former owner had simply buried extension cords to "power" outlying barns from the house. Really dangerous stuff for us in the house (and the horses in those barns). Reconfiguring the entire electrical system on the farm was a necessity even as it was incredibly important for us personally.
We're northern Illinois and housing values in my area are devalued by approximately 50 - 60% on average.
NNN0LHI
(67,190 posts)Sounded like something was missing from your story.
Don
Yavin4
(37,182 posts)Thus, everyone is being forced into the volatile markets in order to get a decent return on your investments. And when the market collapses again, and it will collapse, that will wipe out a lot of people again.
hay rick
(9,605 posts)As the rich have confiscated an ever greater share of income that used to go to the middle class, they have run out of places to invest it. Stagnant incomes for the majority of the population means declining consumer demand and an economy that is running far below full utilization. With excess capacity in much of the economy, there is little call for capital investment in productive industries.
Corporations are also sitting on record levels of cash.
Middle class people who are still able to save find that there is little demand for their savings and must settle for meager returns or seek out increasingly risky investments. The latter is a really poor idea if the funds are intended for retirement.