According to the National Financial Capability Study which has occurred every 3 years since 2009:
- Out of Pocket Medical Expenses are a significant source of financial strain.
- Since low education and low income often go hand-in-hand with poor health and lack of insurance, households with low socioeconomic status are both more likely to face economic shocks and less prepared to deal with them.
- Those who are most likely to face a health shock — are 15 to 30 percentage points less likely to have money to cover an emergency than respondents on the opposite end of the scale.
- The NFCS-ALP reveals a widespread lack of planning. Only 40% of respondents have ever thought about their retirement savings.
- Only 47% of workers aged 40 to 59 have planned at all.
- Among younger (workers aged 18 to 39) the figure is much lower: it is only 31%.
- Even when it comes to individuals aged 60 and older, less than 50% have thought about planning for their post-work years.
- More than half of older workers on the verge of retirement have not done any retirement planning.
- As further evidence of the financial fragility of American families, only 44% are certain they could come up with $2,000 if an unexpected need arose within the next month.
- Among workers over the age of 60, the median financial wealth is only $1,500 for those who have not planned.
The moral of this story is obvious: Americans are not preparing themselves for their financial futures. The long-term implications are serious and not to be ignored. For fear of sounding like a broken record, the earlier you start saving for your retirement the better off you will be. But regardless of your age it’s never too late to start saving. Lastly, the NFCS study found that “…Higher financial literacy correlates strongly with whether individuals plan for retirement and have rainy day funds.” Educate yourselves and enjoy your golden years.
Social Security is currently fully funded through 2032. And after the trust fund runs out the program faces automatic 25% benefit cuts for EVERY recipient. Please read that again so we’re clear. Those of you looking to rely on Social Security as a PRIMARY or even as a secondary means of retirement income need to seriously reevaluate that decision TODAY.
According to the SSA, Social Security has been running a deficit since 2010 and owes $11.3 Trillion more in benefits over the next 75 years than it will receive in payroll taxes. For more read this article by David C. John of the Roe Institute for Economic Policy Studies.
Some proposed fixes to the Social Security deficit are as follow:
- Fix the annual cost of living adjustment to accurately reflect the best available inflation index. Using a ‘chained’ index would reduce the inflation amount by about 0.3% per year.
- Increase Full Retirement age. People are living longer now. Full retirement age is now 67. It is suggested that full retirement age be increased to between 68 and 70 years old.
- Focus Social Security benefits on those who most need them. This is a sore spot for some but the program was originally designed to protect seniors from poverty and economic hardship. It has been suggested that Social Security focus benefits on lower income workers by paying lower benefits to those with high levels of non-Social Security retirement income. Or even more drastic: Completely eliminate benefits for those with the highest amounts of non-Social Security income.
- Increase Social Security taxes. We currently pay 6.2% of our earning into the Social Security system up to $117,000 of earned income. If that tax is increased to 7.2% by 2036 it would eliminate over half of the deficit.
- Lift the payroll tax cap. The rich don’t pay Social Security tax on anything more than $117,000 of their incomes. If this cap was gradually eliminated it would reduce the deficit by 71%.
This crisis is real. And if you live past 2032 you will be affected. I won’t even be 67 yet. So the legislation that passes on this subject is EXTREMELY important to me and YOU. We have to pay attention to this conversation and engage our lawmakers so the necessary changes are made to fix the Social Security crisis. DO NOT keep your head in the sand on this my friends. It’s too important. And it CAN BE FIXED if we stay engaged!
The following post might scare you. But that is by design.
In July of 2013 the National institute on Retirement Security (NIRS) released “The Retirement Savings Crisis: Is it Worse Than We Think?” The study found that private sector retirement access is near its lowest point since 1979 with only 52% of employees in jobs that offer retirement benefits. So half of America isn’t even in the position to take advantage of employer-sponsored retirement planning.
A critical finding of the report is that while households face a growing retirement savings burden, the typical US working-age household (age 25-64) has only $3,000 saved in retirement accounts while the typical household nearing retirement has only $12,000.
People of color are less likely than whites to have access to a pension or 401(k) at work. Nearly two-thirds of households of color have no savings in a 401(k) or IRA type account, compared to slightly over one-third of white households. Three out of four households of color (75%) have retirement savings less than $10,000. Among households of color with retirement account assets, the median balance is $30,000 for near-retirees — grossly insufficient as an income source.
If you’re not scared yet, you’re not paying attention…
PART 2
All Things African-American Retirement!
