OUR RETIREMENT SYSTEM IS BROKEN

 

Baby Boomers in the United States are currently 62 to 80 years old. My wife and I will both be 75 in September. In many ways, our retirement has been all we expected. It would be easy for us to assume that the American retirement system is working well and protecting older folks now and into the future.

This assumption would be a mistake.  Those experts who make a living analyzing the aging population have reached the opposite conclusion. America’s retirement system is broken.

A study in 2024 found that one in 10 (10.2%), or 5.9 million adults ages 65 and older, had incomes below the official poverty level. Without Social Security, 22 million more adults and children would live in poverty. If Congress does not act by 2032, Social Security will only collect enough revenue to pay 78% of scheduled retirement benefits.

To exasperate the financing of the aging problem, an average boomer who is currently 65 years old can expect to live another 18 to 20 years. (For someone born in the United States in 1930 the average life expectancy was about 59.7 years.)

This commentary will review some basic history of our retirement system. I will then turn to several recent books that have documented the “aging class” in America. These experts explain the financial problems of the growing older population and offer some plans for “rescuing retirement.”

Until the late 1800s, agriculture dominated the economy. Older Americans owned their own farms and passed them on to their children. My own family provides an example. At the turn of the century, my N.J. grandmother received one of six farms divided among her siblings. That farm passed to my father’s older brother who worked the land until his death in the late 1960s.

The needs of farm hands were covered by the broader community. Women stayed on the farm and cared for elderly family members. Life spans were relatively short.

The fate of older people changed dramatically as workers left the farms and women entered the labor market. Along with new immigrants, they poured into city offices, factories, and mines. There were no longer insular communities, or farm assets help the elderly. The majority of Americans had to continue working until they dropped. Secure retirements did not exist.

In the early 1900s, European countries faced up to the industrial revolution and began establishing government-run pension systems. The US waited until 1935 to establish Social Security benefits.  There were more dramatic changes after WWII. Company sponsored pensions were designed to attract and keep workers in tight labor markets. By the 1960s, more than 40% of American workers had a private pension in addition to Social Security. As a result, a third of the elderly population no longer lived in poverty.

What has become of this remarkable public/private retirement system to shield the elderly from financial hardship? Unfortunately, earlier gains have been reversed with lower-income workers hurt more than others.

The British historian, Robin Blackburn, explained the dilemma in his excellent 2007 book, Age Shock. Blackburn found that “Many elderly will be forced to take jobs in their later years that are too demanding and will be unable to afford needed health care, as life spans increase and costs rise.” Blackburn concluded that there was little political interest in the problem of old age poverty as other topics dominated the public debate.

Two more recent books explain the problem well.  Teresa Ghilarducci is a labor economist and nationally recognized expert in retirement security. Her book, Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy, presents evidence that the system benefits private interests and exploits the most vulnerable people. She tells the stories of elderly Americans locked into jobs—not because they love to work but because they must.

Ghilarducci documents that while 50% of Americans age 62-70 are retired, their living standards have diminished significantly since they stopped working. Another 28% are still working and cannot afford to stop. She points to 1) inadequate savings, 2) insufficient Social Security payments, and 3) risky defined-contribution pensions like 401(k)s, that have supplanted traditional defined-benefit pensions paid by employers.

Ghilarducci is a progressive economist who believes that coercive corporate elites have replaced “working more hours” from the Gilded Age with “longer working lifespans” today. This policy deflates wages and reduces business costs by increasing the labor pool.

The second book Golden Years: How Americans Invented and Reinvented Old Age was written by James Chappel, an historian at Duke University. He is affiliated with the Duke Aging Center which focuses on aging research.

Chappel also traces the history of old age as a distinctive “stage of life.” He points out the many contradictions in old age policy as longer lifespans and spiraling health care costs have produced more instability, not an improved system. He believes the original, post-war model has crumbled. Instead of more security, older people are forced back into the workforce.

How could our retirement system be made better? Chappel urges Baby Boomers of all stripes to view themselves as a common social group. To borrow a popular phrase from the 1960s, Boomers need a “class consciousness,” predicated on inclusion and diversity.

Tribal partisan politics have inexplicitly moved us old folks away from being unified. Pro-business policymakers have seized this opportunity to push the burdens of aging back onto older Americans and their families.