Over the past few weeks, this idea of a looming retirement crisis is one that’s been in the news quite a bit. There are proponents on both sides with valid arguments that we’re going to explore here. A recent study by the National Institute on Retirement Security found that over 80% of women feel that there’s an impending retirement crisis. Some of the numbers explored in a recent article seem to indicate that, in fact, single women are the most vulnerable demographic. There are two main reasons for this: these women lack a partner who can provide a supplementary income and, on average, women are still earning less than men.
On the other end of the spectrum, we have the VP of a prominent website who recently published an article on why there isn’t a looming retirement crisis. The basis of this argument is that an impending crisis has been expected since the mid-90s. Some of the retirees who had to go through the recession in the 2000s right before exiting the workforce also turned out relatively okay. This is of course taking them as a group; there are plenty of unfortunate exceptions to the rule. Another good point in his analysis is that the median income has continued to go up year over year for all age groups. The median income for people over 65 is not amongst the lowest by any stretch of the imagination.
Most of the surveys that we’ve explored before point to the fact that all retirees are worried about inflation. What inflation is going to do is diminish their purchasing power, regardless if they’ve saved up enough for retirement. This is one of the main reasons why people plan to stay in the workforce past the age of 65. At the same time, many people plan to remain in the workforce because they want to remain occupied.
On another front, the issue could be a savings problem, not an income one. As the previously referenced article pointed out, the median income has increased across all age groups over the last 30 years. There is a minor dip that took place for those over the age of 65. This can raise some eyebrows. That dip could stem from the fact that people who turned 65 in 2020 or 2021 were forced into early retirement. This situation could have thrown a major wrench in the retirement savings plans that they were following up to that point, especially for those who were planning to stay on board past their 65th birthday.
The rise of entrepreneurship and the gig economy are two other elements that could put a strain on the next generations of retirees. Many of these people won’t have access to the traditional forms of retirement savings. A disregard for financial plans or even poor investment advice could put these people way behind the eight-ball. These seem to be the major concerns that the women surveyed by the National Institute on Retirement Security are alluding to. Is the crisis imminent? It might be, but it probably won’t hit this next generation of retirees as hard as it will the generations after them. On a per-case basis, the retirement crisis could come as a result of poor financial planning.
