Can’t retire? Why “Working Longer” Isn’t Good Retirement Advice
Financial planners usually advise you to work as long as possible, so you can increase your retirement savings while you wait for a larger Social Security check.
But this tip assumes you have the luxury of deciding when to stop working. Tens of millions of Americans don’t.
Here’s the truth: Retiring early – or even at full retirement age – is nothing more than a joke for these tens of millions. Retire on what? Most people have only a fraction of the assets they will ever need. and annuities? Unless you work for the government — state, local, or federal — you likely won’t have one.
Read: Study finds Social Security recipients lose $182,000 by claiming too soon
It’s things like this — the decades-long trend of companies to shift retirement money off their balance sheets and onto the backs of their employees — that millions have to keep working whether they want to or not. However, a comprehensive report from the Economic Policy Institute (EPI), a Washington, D.C.-based, nonpartisan nonprofit think tank notes, “Many face barriers to working longer and lack access to decent jobs with decent pay. Older workers often struggle with Those who cannot retire lower quality jobs and earnings as a result of a loss of bargaining power.”
It’s a painful catch-22 game.
There is a racial divide here, too. The Fed, in its 2020 report, said that white households had the highest level of average and median household wealth: $188,200 and $983,400, respectively. The median — which means that one half has more and the other half has less — is the key number here. If half of all white families have less than $188,000, this indicates that about $7,500 could be withdrawn each year to live, using the often recommended 4% withdrawal rule. That’s a paltry $625 a month, before taxes.
Think this is bad? Now consider Fed data on Hispanic, Black, and Hispanic families. The average wealth for Hispanics is $36,100, while the average wealth for black families is $24,100.
Hispanics and blacks are “particularly disadvantaged in the labor market, and are not served by a retirement system that relies on employers to provide benefits voluntarily,” says Heidi Schierholz, president of EPI.
The report indicates that this defect is a deep-rooted structural problem. Iin that blacks and Latinos typically work on the lower rungs of the economic ladder, and that “their bad jobs make for bad retirements.”
But then again, even a “bad retirement” isn’t an option, given the aforementioned savings rates. Thus, many workers are compelled by economic necessity to continue to work, usually in the same type of low-paying job with minimal – at best – benefits. In other words, there is no way out.
“Some workers may benefit from delaying retirement to increase their savings and accrued benefits while shortening the retirement period,” says EPI. But expecting workers to work into old age is neither a feasible nor a just solution to the retirement crisis. For one thing, the increase in life expectancy was concentrated among higher earners who had less physically demanding jobs. On the other hand, Americans already work more and longer than workers in most peer countries.”
The epidemic is another problem. The Brookings Institution claims that “Long Covid” is keeping millions out of the workforce. Many workers on the lower rungs of the ladder may not have the luxury of working from home, and may be forced to choose between risking their health or giving up the meager job they currently hold.
This painful truth underscores the absolute importance of the two outlets that minority workers can rely on: Social Security and Medicare.
Read: Don’t Make These 5 Mistakes During Medicare Open Enrollment
The financial protection offered by Social Security is especially important for black, Hispanic, and other workers of color, says Acting Social Security Commissioner Kilolo Kijakaze, who notes that it makes up “a significant share of total retirement and disability income for people of color.” and for women.” She calls out “structural barriers” that “contribute to the unequal economic well-being” of these groups.
Read: Are you fit for your age or are you weak? Here’s how to find out.
There are several policy proposals that could eliminate these structural barriers. The EPI report suggests expanding the Earned Income Tax Credit, which could help more adults without dependent children. Tax credits can offset the cost of providing health insurance for older workers. What about better enforcement of age discrimination laws? That is, if workers know their rights and what they can do if they feel discriminated against because of their age.
Could any of these things happen? Aside from better enforcement of age discrimination laws already on the books, the political divide that is about to define Washington’s identity — with Democrats still in the Senate, while Republicans control the House — points to a stalemate in the next two years.
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