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525: Retirement Savings

Are you saving for retirement?


Full episode script

While retirement isn’t exactly a *new* idea in the world, the opportunity for everyone to retire isn’t exactly an old idea, either. There’s historical evidence that the Roman Emperor Augustus started paying pensions to Legionnaires who had served 20 years. Similar troop pensions were paid out after that by a variety of countries, but it wasn’t until 1684 that a Western, non-military public servant received a pension.  It was in 1865 that American Express offered the first employer-provided retirement plan, and 1935 that the United States launched social security.

Social security, though, is far from a secure system in the US. There’s been an increase of senior citizens living in poverty — As The Atlantic put it, quote:

Older Americans were the only demographic for whom poverty rates increased in a statistically significant way between 2015 and 2016, according to Census Bureau data. While poverty fell among people 18 and under and people 18 to 64 between 2015 and 2016, it rose to 14.5 percent for people over 65, according to the Census Bureau’s Supplemental Poverty Measure, which is considered a more accurate measure of poverty because it takes into account health-care costs and other big expenses.

You could spend days – no, lifetimes – digging in to why and how the retirement system that began in the 1800s in its modern incarnation has started to crumble — and the moral arguments about what a retirement should or could look like in a modern society.

For all of that study and debate, though, there’s also the fact that almost nobody in the US — and several other counties — are saving what would appear to be enough to eventually quit working entirely. There’s a lot of numbers and stats out there. One from the likely at least somewhat biased National Institute on Retirement Security found that, quote:

The average working household has virtually no retirement savings. When all households are included— not just households with retirement accounts—the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households.

The findings confirm that the American Dream of retiring comfortably after a lifetime of work will be impossible for many. Based on 401(k)–type account and IRA balances alone, some 92 percent of working households do not meet conservative retirement savings targets for their age and income. Even when counting their entire net worth, 65 percent still fall short.

Returning to the Atlantic, quote:

But even people who emerged from the recession relatively unscathed may have a hard time saving, according to a 2017 report from Government Accountability Office. Average wages, when adjusted for inflation, have remained near where they were in the 1970s, which makes it hard for workers to increase their savings. This has had a significant impact on the bottom 80 percent of workers, for whom average wages have remained relatively constant, even as income increased for the top 20 percent of households in the past three decades.

In other words, if you’re not saving — you’re not alone. Though you can find plenty of advice about just skipping a cup of coffee every day making things magically better, there’s a lot to be said for looking a little deeper.

This script may vary from the actual episode transcript.