Nearly all Americans share a common goal: to reach the retirement finish line on their own terms. That means retiring at a time of their choosing, and with enough money to last them comfortably throughout their retirement.
However, the retirement landscape today looks nothing like it did even a few decades ago. More people than ever are entering retirement with insufficient savings, meaning the dream of a timely and comfortable retirement is being tossed by the wayside.
Seniors’ retirement dreams are being dashed
We certainly don’t have to look very far to understand what sort of challenges today’s seniors are facing. For instance, according to May data from the St. Louis Federal Reserve, the personal saving rate rose to an eight-month high of 5.5%. However, this is less than half of what it was 50 years ago (11.9%), and it’s well below the recommended 10% to 15% of your monthly income that financial advisors recommend workers sock away for emergencies and their retirement.
Social Security is another cause for concern. Though the program has been paying out benefits for more than 75 years, and it’ll continue to do so for many generations of workers to come, it’s facing a massive budgetary cash shortfall that could result in a benefits cut of up to 21% by the year 2034, according to estimates from the Social Security Board of Trustees’ 2016 report. Roughly three out of five seniors already relies on Social Security to account for at least half of their monthly income, so a benefits cut could be a devastating blow.
Certain costs for seniors are also pushing higher at a rate that’s much faster than wage growth, or the annual cost-of-living adjustment (COLA) they receive from Social Security. Medical care inflation, as an example, has risen at a quicker pace than Social Security’s COLA in 33 of the past 35 years. In other words, what income seniors are generating from Social Security is potentially being eaten up by private medical costs and Medicare expenses (once you turn 65).
Some baby boomers nearing retirement age have also been punished twice. First, their investments were hit by the Great Recession, which saw the broad-based S&P 500 lose more than 55% of its value. Then, some of these individuals watched the S&P 500 rally for eight years to a new all-time, all while they remained on the sidelines, too worried to reinvest their capital in stocks.
One chart that sums up seniors’ retirement struggles
But if you knew none of the above struggles, the following chart tells you everything you need to know about seniors’ current retirement woes.
As the chart from the St. Louis Federal Reserve shows, employment levels for those aged 55 and up have exploded over the past two decades. In June 1997, 15.94 million seniors aged 55 and up were employed. As of May 2017, 35.17 million seniors of the same age range were employed — a 121% increase. After nearly three decades of practically flat senior employment levels (the late 1960s through late 1990s), things began to shift dramatically within the past two decades, and they haven’t changed since.
Some of this shift could very well be due to the aging of baby boomers. It was widely expected that, with the normal retirement age lying between 62 and 65, we would see…