by Mitch Kokai
Senior Political Analyst, John Locke Foundation
THE MEDIA ARE FULL of stories that all too many Americans are not saving enough for retirement. Some alarmists declare that more than eight out of ten are financially unprepared for their “golden years.” Accordingly, they conclude this crisis requires major government intervention, ranging from sharply boosting Social Security benefits to raising taxes on the rich and then sharing that money with those less rich. Wealth tax, anyone?
But it turns out that the situation isn’t so dire after all. A paper from the American Enterprise Institute, “Why Americans Don’t Face a Retirement Crisis,” written by two experts–Andrew Biggs, a former principal deputy commissioner of the Social Security Administration, and Sylvester Schieber, a former chair of the Social Security Advisory Board–looks at the facts instead of the politically motivated hype, cutting through to the truly relevant data: what people have actually saved for retirement, what they’ll get from Social Security and what they’ll get from defined-benefit plans (several million people are still covered by those). The paper then goes on to compare all of that information with what Americans will need to maintain the standard of living to which they’ve become accustomed during their working lives. The vast majority of people are in decent shape.
Retirement savings as a percentage of household earnings went up between 2007 and 2013, from 124% to 128%. According to the Federal Reserve, in fact, these savings as a percentage of personal incomes have been on the upswing since the Fed began tracking this data in 1981. Other surveys confirm that the combined total of all personal retirement assets as a proportion of personal incomes has been moving up nicely.