Column: 'Retirement crisis' or not, Americans need to reboot their approach

Jan 12 (Reuters) – Retirement researchers and policymakers love to debate this question: is there a retirement crisis in the United States?

Both sides can marshal numbers to support their arguments. But the simple truth is that a majority of older households approaching retirement simply are not financially prepared.

The most important measure of financial readiness is your ability to replace working income after you retire – in other words, your ability to maintain your standard of living. As a rule of thumb, financial planners tell us most people will need to replace at least 70% of their wage income in retirement.

Anyone who has not been able to save much for retirement will depend solely on Social Security – and that typically replaces only about 40% of pre-retirement income.

Many households will struggle to close this gap, and that is what prompted me to write my new book, “Retirement Reboot: Commonsense Financial Strategies for Getting Back on Track” (Agate Publishing). The intent is to walk readers through a series of strategies that can improve retirement security, even with a late start.

Traditional financial-planning wisdom stresses the importance of an early start – and there is no doubt that having time on your side gives you the critical advantage of compounding as you contribute to retirement accounts over the years.

But “Retirement Reboot” offers a tour of possible levers you can pull relatively late in the game. These are not necessarily easy steps to take, but they are achievable. And they are not gimmicks.

The strategies include making a specific financial plan and taking a strategic approach to timing your retirement. Paying careful attention to getting the most from Social Security and Medicare are equally critical. And, since home equity often is the most significant asset on the household balance sheet, I explore ways to unlock it in retirement.


The numbers tell us that a very large segment of Americans nearing retirement need to heed these foundational strategies. Federal Reserve data indicates that the median balance in a retirement account in 2019 for a working household nearing retirement (age 55-64) was just $144,000 – an amount that will not last very long in retirement.

The Elder Index, produced by the Gerontology Institute at the University of Massachusetts Boston, measures the cost of living for older people living as couples or alone. It is built around the typical budgets of seniors, and it shows that roughly half of Americans over age 65 living alone have incomes that are below the index.

What accounts for these appalling figures?

I have been covering retirement now for 15 years, and as a student of the system I estimate that I have produced nearly 1,000 articles and podcasts, and conducted well over 3,300 interviews on topics ranging from Social Security and Medicare to late-career work, investing and saving, workplace retirement plans, pensions, taxes, financial planning, housing, careers, long-term care and caregiving.

Here is the most important thing I have learned: Complexity is the enemy of everyday working Americans trying to build toward a financially secure retirement.

The United States has created a set of systems for retirement that call for expertise and knowledge beyond what is reasonable to expect from the average person.

The complexity of these systems makes it harder for individuals to make fundamental personal decisions about their own retirement planning: How to save and invest for retirement. How to stay employed later in life. Figuring out the right time to retire. When to file for Social Security. How to transition from employer health insurance to Medicare, and make smart enrollment decisions. What to do about long-term care insurance. How to hire a trustworthy financial planner. Even the experts tell me that they have trouble with these questions themselves, or when they try to provide guidance for friends and family.

We also tend to have short memories in this country when it comes to the economy. Americans approaching retirement now have worked through a number of very damaging economic cycles.

If you were 55 years old in 2021, you have experienced four recessions that might have left you unemployed for extended periods. Two of them were especially devastating for older workers: the Great Recession of 2009–10 and the pandemic-induced economic coma of 2020. Both of these downturns produced higher rates of job loss – and longer periods of joblessness – for older workers than for younger ones. Millions of homeowners lost their homes or found themselves deep underwater in the housing crash accompanying the Great Recession. These economic calamities had long-lasting effects that were very difficult – if not impossible – to recover from.

This economic volatility – coupled with flat wage growth – goes a long way toward explaining why so many households have no significant retirement savings.

Policymakers have tried to address these problems with legislation aimed at widening access to retirement savings plans, automating the system and boosting tax breaks. But that approach has produced very marginal improvements in retirement security. Simply put, many of these households do not have the cash resources needed to set aside in tax-deferred retirement accounts after meeting their immediate household spending needs.

Instead, we should renew our focus on our social insurance system – Social Security and Medicare – which are the foundations of retirement security in the United States. Expansion and modernization of these critical programs offer the best policy path to rebooting retirement security.

The opinions expressed here are those of the author, a columnist for Reuters.

Writing by Mark Miller
Editing by Matthew Lewis

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.