Allison Schrager
Allison Schrager
RETIREMENT ADVISOR
a certain wealth level , and there ’ s no strategy to help people spend in retirement . It is a step in the right direction — but not enough to overcome the original sin .
Myth No . 2 : A Retirement Crisis Is Inevitable Because Most People Have Not Saved Enough .
The fact that there aren ’ t good ways to measure or invest for retirement income has created confusion and insecurity about how much money people need to retire . A majority of people think they don ’ t have enough to live comfortably . Obviously it would be better if everyone saved more , and lots of people don ’ t have
Myth No . 3 : Social Security Will Be Fine , But You Won ’ t Get It .
Americans have contradictory feelings about Social Security . On the one hand , they are resistant both to reducing benefits and to paying higher taxes themselves to fund them . On the other , nearly half of Americans don ’ t think they will ever see benefits paid to them .
In fact , the opposite is true . Yes , Social Security is in trouble and needs to be reformed , ideally with some combination of higher taxes , lower benefits and a later retirement age . But no matter what happens , pretty much everyone alive today will get their benefits in some form .
True , the Social Security program will not be able to pay full benefits in 2034 , when it will take in less in revenue than it pays out ( the “ trust fund ” to finance the difference is no more than an accounting
Many retirees are in better health and have more and better options for part-time flexible work . The bottom line is that today ’ s retirees have a better standard of living than previous generations did .
enough to retire the way they ’ d like . But compared to previous generations , most Americans will be better off in retirement , income-wise .
True , defined-benefit pensions used to be more common and were more generous . But even in their heyday , most people didn ’ t have them . Individual accounts are cheaper to offer and regulation encourages them , and the result is that more people have retirement savings and exposure to the stock market .
This may explain why people are able to spend more in retirement than previous generations . Many retirees are also in better health and have more and better options for part-time flexible work . The bottom line is that today ’ s retirees have a better standard of living than previous generations did . device ). If nothing is done , benefits will need to be cut by about 25 %. It ’ s also true that this obligation will only grow as the population ages , exponentially so if interest rates stay high or go higher .
All that said : When push comes to shove , retirees tend to be the first ones paid . They vote , have lots of political power otherwise , and are generally sympathetic . It ’ s likely that younger taxpayers will shoulder the burden and make do with fewer services and less spending on other priorities . So even if many pundits remain in denial about the economics , the politics make it a pretty safe bet to plan on getting your Social Security benefits .
What it all adds up to is one of those bad news / good news stories : Too many Americans are thinking about their retirement investing all wrong . But they are probably better off than they think .
ALLISON SCHRAGER is a Bloomberg Opinion columnist covering economics . A senior fellow at the Manhattan Institute , she is author of “ An Economist Walks into a Brothel : And Other Unexpected Places to Understand Risk .”
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