Thursday, January 6, 2022

I am 75 and can't afford to quit work

Saving for retirement is not an option, but it is an opportunity that fewer and fewer are taking advantage of in the US and in Canada. Government pensions in Canada are designed to replace between 35 and 40 percent of pre-retirement income. That is if you have worked and get Canada Pension plus Old Age Security. In the US their system is designed to replace between 38 and 45% of pre-retirement income. In the last decades, companies have moved away from offering any type of pension plan and are turning the responsibility of saving for retirement over to the individual. That is not working well for the individual but is working well for companies.

An average of 65 million Americans receive a monthly social security benefit, with the majority of payments going to retired workers and their dependents. When Covid-19 hit the US, millions of workers in the US and Canada had to rely on food banks to have enough food to eat, and in the US where health insurance is tied to a job, many lost health care and had to pay out hundreds of dollars out of pocket for treatments.

The Media reports of older workers have often been framed as feel-good stories, such as a viral news report of an 89-year-old pizza delivery man who received a $12,000 tip raised by a customer out of remorse, as he works 30 hours a week because he can’t afford to retire on social security benefits alone. Or an 84-year-old woman who started a new job as a motel housekeeper in Maine in July 2020. Or an 81-year-old woman in Ohio who volunteered to start working at her favourite restaurant in November 2021 because it shut down temporarily due to an inability to hire and retain enough staff.

The good news stories hide the grim reality that millions of Americans are working into their senior years because they can’t afford to have a job.

Over the next decade, the number of workers ages 75 and older is expected to increase in the US by 96.5%, according to the Bureau of Labor Statistics, with their labour force participation rate projected to rise from 8.9% in 2020 to 11.7% by 2030, a rate that has steadily increased from 4.7% in 1996.

The number of workers who retired during the pandemic was about 2 million more than expected. 50.3% of US adults ages 55 and older said they were out of the labour force due to retirement in the third quarter of 2021, compared to 48.1% in the third quarter of 2019, according to an analysis by Pew Research Center. Though in recent months, the unretirement rate of US workers has gradually increased toward pre-pandemic levels.

As the ageing US population grows, participation in retirement plans has declined since 2000. Nearly half of all families in the US have no retirement savings at all and inequality among Americans based on retirement savings is greater than income inequality. Over 15 million adults ages 65 and older are economically insecure, with incomes below 200% of the federal poverty line, with Black, Hispanic and women ages 65 and older more likely to live in poverty.

With the average estimated social security retirement benefit in 2021 at $1,543 a month, even with a 5.9% cost of living adjusted increase for 2022, millions of Americans who rely on social security benefits are forced to continue working past retirement age in order to make ends meet.

As the US population ages, with millions of Americans having no retirement savings, the number of older Americans with student debt, either for themselves or for children, is on the rise.

Nearly 9 million Americans ages 50 and older still have student debt, and the amount owed by this demographic is growing faster than any other age group. In 2015, 40,000 Americans had their social security retirement benefits garnished for student loans.

If you are still working pay attention and start saving for retirement, do not follow the lesson of your elders.

 

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