Asking The Wrong Questions About Retirement Saving

My intuition and informal observations have long concluded what is reported here.

Conventional wisdom and the rhetoric from various advocacy groups such as SocialSecurityWorks would never consider this. Instead they view retirement income as the Social Security benefit. They also ignore assets such as home equity.

There is no doubt that if you are a low income worker, you will still be low income in retirement, but not necessarily worse off.

Another study, this time by economists at the Internal Revenue Service and the Investment Company Institute, compared the incomes of Americans three years after they retired to their incomes just prior to retirement. The typical low-income household had a higher income in retirement than they did just prior to retiring, even if we exclude any income from part-time work in retirement.

The explanation for these results is that Social Security coupled with safety net programs like Supplemental Security Income are often enough for low-wage workers to maintain their lifestyle in retirement, even with low levels of savings. If you’re a near-poverty level worker, does it make sense to reduce your standard of living even further in order to boost your income in retirement, when your risk of poverty is already significantly lower? I don’t know of any economic or financial planning rule that says they should.

Source: Asking The Wrong Questions On Retirement Saving

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