I know I could have saved more, and if you were to rifle through my life over the last 30 years, you would see more than one dumb thing I have done financially. I can’t change that now and neither can you, but let’s not mix up individual, isolated behavior with the systemic factors that have caused a 77-trillion-dollar retirement income gap.
Millions of boomer-age Americans did not land here because of too many trips to Starbucks. We spent the last three decades dealing with flat and falling wages and disappearing pensions and through-the-roof cost on housing and health care and education.
It used to not be like this. We all remember the three-legged retirement income stool which had the savings and pension and social security. Well, that stool has gone wobbly.
Take savings – what savings? For many families, there’s just nothing left to save after the bills have been paid. The pension leg of the stool has also gone wobbly. We can remember when many people had pensions.
Today only 13% of American workers are employed by companies that offer them. So what did we get instead? We got 401(k)-type plans and suddenly responsibility for retirement planning got shifted from our companies to us. We got the reigns but we also got the risk, and it turns out that millions of us just aren’t that good at voluntarily investing over 40 years. Millions of us just aren’t that good at managing market risk.
And really the numbers tell the story. Half of all American households have no retirement savings at all. That would be zero. No 401(k), no IRA, not a dime. Among 55-to-64-year-olds who do have a retirement account, the median value of that account is $104,000.
Now, $104,000 does sound better than zero, but as an annuity, it generates about $300. I don’t have to tell you that you can’t live on that. With savings down, pensions becoming a relic of the past and 401(k) plans failing millions of Americans, many near-retirees are dependent on social security as their retirement plan.
But here’s the problem. Social security was never supposed to be the retirement plan. It’s not nearly enough. At best it replaces something like 40% of your pre-retirement income.
Things have changed a lot from when social security was introduced back in 1935. Then, a 21-year-old male had a 50% chance of living until he was 65. So he retired at 60, did a little fishing, kissed his grandkids, got his gold watch – he’d be dead within five years of receiving benefits. That’s not the pattern today.
If you’re in your late 50s and in good health, you’re going to live easily another 20 or 25 years. That’s a really long time to make ends meet if you are broke.
So what’s the play if you’ve landed here and you’re 50 or 55 or 60? What’s the play if you don’t want to land here and you’re 22 or 32?
Here’s what I’ve learned from my own experience. The cavalry’s not coming. There is no big rescue, no prince charming, no big bailout in the works.
To have a shot at something other than being old and poor in America, we’re going to have to save ourselves and each other. I’ve had to come out of the shadows, stand here openly, and I’m inviting you to do so as well. I’m not going to tell you that it’s not easy. I ventured though to tell my story because I thought it would make it a little easier for people to tell theirs.
I think it’s only through our strength in numbers that we can begin to change the national “la-la” conversation that we are having on this retirement crisis. With so many of us shell-shocked and adrift about what has happened to us, we’re going to have to build up from the grassroots, forming what I think are resilience circles. These are small groups of people coming together to talk about what has happened to them, to share resources and information and to begin to figure out a way forward.
I believe from this base that we can find our voices again and sound the alarm – start pushing our institutions and policymakers to go hard on this retirement crisis with the urgency it deserves. In the meantime – and there is an “in the meantime” – we’re going to have to adopt a live-low-to-the-ground mindset, drastically cutting back on our expenses.
And I don’t mean just living within our means. A lot of people are already doing that. What is called for now is to, in a much deeper way, ask ourselves what it really means to live a life that is not defined by things. I call it “smalling up.”
Smalling up is figuring out what you really need to feel contented and grounded. I have a friend who drives really beat-up, raggedy cars, but he will scrimp and save $15,000 at one point to buy a flute because music is what really matters to him. He smalled up.
I’ve had to also let go of magical thinking – this idea that if I just was patient enough and tightened my belt that things would go back to normal. If I just sent in one more CV or applied to one more job online or attended one more networking event that surely I’d get the kind of job I was used to having. Surely things would return to normal.
The truth is I’m not going back and neither are you. The normal that we knew is over. In this new place that we are, we’re going to be asked to do things that we don’t want to do. We’re going to be asked to take assignments that we think are beneath our station and our talent and our skill. I have had to get off my throne.