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The Many Facets of Retirement Inequality

Retirement inequality is a thread running through several articles that have appeared here this year.

One blog that was particularly popular with our readers distinguishes retirees who have enough wealth to maintain the same spending levels throughout retirement from those who will, over time, have to cut back and reduce their standard of living.

The research behind the article – “Health and Wealth Drive Retirees’ Spending” – makes clear that wealth is just one component of a satisfying lifestyle. Even retirees who can afford to maintain their living standard may not be healthy enough to enjoy their money to the fullest. The retirees who have both – health and wealth – are best equipped to maintain their pre-retirement lifestyle.

Homeownership also marks a dividing line between the haves and have-nots. A home is one of retirees’ largest sources of wealth. Although most are hesitant to withdraw home equity, the ones who have equity and tap it to pay medical bills see large, positive health benefits, according to “Using Home Equity Improves Retirees’ Health.”

Pensions are another dividing line. “Retirees with Pensions Slower to Spend 401(k)s” shows the value of having guaranteed income from defined benefit pensions, which are all but extinct outside the public sector.

Retirees with pensions are less reliant on their 401(k)s. The evidence: the researchers found they don’t deplete their savings as rapidly as retirees who lack pensions. The downside of not having a pension, they said, is “more risk that they will outlive their savings.”

So, how can retirees’ lives be enhanced? Get more workers to save for the future.

In the article “Viewing Retirement Saving as a Fresh Start,” researchers tested various ways to increase the resolve to save. Workers were more likely to sign up for a 401(k) or increase the 401(k) contributions deducted from their paychecks if they were presented with the idea of doing so on their birthday or the first day of spring. The prospect of a fresh start on an important date proved to be persuasive.

In “Workers: Social Security Info is Eye-Opening,” working-age adults said they learned crucial information when they looked up the government’s estimates of their Social Security benefits. One 31-year-old, upon seeing his estimate for the first time, realized that it is “not quite nearly enough to survive on.”

And that’s why workers need to start saving early. The majority of adults have never logged on to Social Security’s website – and they should.

Other popular blogs in the first half of 2022 included:

  • “Explaining Social Security’s Earnings Test
  • “Medicare’s Tricky if You’re Employed
  • “Retired Couple Chopped Down $40,000 in Debt
  • “Wandering into Retirement Worked for Him
  • “One-Stop Shopping for Retiree Financial Aid
  • “Adults with Disabilities Cluster in Regions

Some of the research studies reported herein were derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.

2 Responses to The Many Facets of Retirement Inequality

  1. geoffrey hewitt says:

    So most people do not realize that public pensions are financed by all individual taxes including those without a pension who work in the private sector. NJ has the worst unfunded pension in the US with unfunded liabilities of 74 billion or 8K for every man, woman and child in the state. With the highest RE taxes in the US, one would be ignorant to live there and pay those fees.

  2. Jennifer Lee says:

    Please realize that those who make more can save more and that even if employed, if one does not get sufficient yearly raises, their social security benefits are affected. Saving is much harder for families and those who do not have a pension to rely on in retirement. Social Security benefits need to be raised as they were based on the fact that workers could save and would have a pension. The third leg would be Social Security and it was not intended to be all one would live on. Yet the government allowed pensions to go by the wayside and public pensions are underfunded as well. Inflation affects savings. What do they want people to do? Not everyone is a financial wizard who can invest and make great returns.

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