American workers not making enough to save for retirement

Social Security benefits

An Associated Press analysis of Social Security has found that, on balance, the program is probably not the very best retirement option. Employees currently paying into Social Security will pay more into it than they will probably get in ]Social Security benefits. Learn more at personalmoneymetwork about Social Security retirement benefits.

 

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Where is the article? Personalmoneynetwork is a payday loan lender website hawking payday loans. Are you a spam bot?

Social Security is as previously noted an insurance program to provide certain minimum level of income in old age. If you want a comfortable retirement you are going to need more than Social Security to make that happen. That is why we have retirement saving plans and pensions.

 

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That is not what I asked. I asked if you were actually willing to assert in public that the real estate bubble in the US that busted in 2007/2008 never existed, and that people in the US did not lose much of their retirement savings through loss of home equity.

It is a pair of simple declarative statements, whose accuracy you can verify by reference to the CBO analysis - the CBO does not project actual health care cost reductions, but rather slower growth in those costs, for the foreseeable future. That slower growth is of course good news, but as health care costs in the US are already far too high and seriously damaging people's prospects for retirement with savings, merely slowing their further growth somewhat is not quite what is needed.

I don't see any actual cost reductions mentioned. I see projected savings from lower rates of cost increase.

By slowing the growth of medical care costs compared with the status quo, yes. Not by reducing those costs, which are more than double anyone else's and still climbing.

Romneycare does have many improvements built in, but cost reductions are not among them - the only significant cost reduction mechanism it features is the same old "competition will drive down insurance premiums" mantra Romney himself was using in his campaign speeches. That's been hogwash from the Heritage Foundation and the Cato Institute and the Ayn Rand acolytes and the Republican campaign speeches for thirty years and more, and it's hogwash from anyone else as well.

Before the legislation takes effect, yes. The causes are under debate - one significant possibility is that a lot more people are postponing or forgoing medical care because they've been priced out of it, lost insurance coverage, etc (there's an entire category of recently unemployed men in their fifties postponing medical care until they hit Medicare age, for example). Continually increasing health care costs, such as we have and expect for the future regardless of Romneycare's benefits, have long been predicted and are now being seen to hit transition levels past which various categories of people disappear from the US health care system except for emergencies. And that is likely to continue, but to no one's credit.

Meanwhile, the extraordinary cost of medical care in the US is surely a significant obstacle to adequate retirement savings for many people.

 

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Are you really that dense Ice?

By the way, where is the “text book” on bubbles your referenced? People lost their much of their retirement savings and home equity in The Great Recession of 2007—20009 as the result of the liquidity crisis brought about by unregulated derivative trading…not because of any fictional bubbles. I am not going to repeat this ad nauseum just because you don’t get it.

Ah, no. The fiscally conservative nonpartisan Congressional Budget Office does not issue declarative sentences without being able to back it up with real data. And in the materials released by the Congressional Budget Office, they cited provisions in Obamacare for reducing healthcare costs in this country. This is what you appear to not understand, inflation drives prices higher each and every year regardless of changes in the market place. You may not think Obamacare goes far enough to change the American healthcare industry. But that doesn’t make Obamacare changes and savings any less real.

Here is the bottom line; reality is not consistent with your ideologically driven notions about healthcare. You can close your eyes and chant la la all day long. But it won’t change the reality of Obamacare and its cost containment measures like paying for quality outcomes versus quantity – something you previously referenced as a cause of high healthcare costs in America.

Apparently, you have not well versed on Obamacare. Because Obamcare provides coverage for all Americans if implemented as designed with Medicaid expansion. So why would people disappear from the US healthcare system when Obamacare guarantees affordable healthcare. The federal government subsidizes healthcare for low income people. So under Obamacare there is no good reason why someone should not be able to afford healthcare in the US. So you machinations here just don’t comport with the reality of Obamacare.

Have you not heard of Medicare? It is the government funded health insurance program for retired people aged 65 and older. Have you heard about Social Security? It is the income guarantee provided by the US government to all folks of retirement age. Health insurance is virtually free for people aged 65 (retirement age) and older.

As I told you in my last post long term care insurance is the greatest potential threat to the savings of retired folks. Long term care is not medical care. Long term care helps take care of seniors when they can no longer care for themselves. And there is a public program to assist seniors who cannot afford that care (Medicaid) but it requires that seniors become indigent before it kicks in.

 

Just wanted to make sure you really intended to claim that there was no real estate bubble busted in 2007/2008 in the US. It's not the kind of thing I would want to assume. Unless you clarify further, I'm going to post here under the assumption that you asserted and believe that the real estate bubble that popped in 2007 in the US never happened.

I am well aware of the practice of correcting for inflation in economic data, and that is assumed. I am not aware of any CBO cost projections for health care in the US that show them declining from one year to the next, at any time in the foreseeable future, under the provisions of Romneycare or any other system.

Romneycare does not provide coverage, it mandates the purchase of coverage from private corporations. It does not contain price controls on this coverage - prices will be set by a presumed "market".

One of the reasons it looks like many people will find themselves unable to afford ordinary medical treatment under the provisions of Romneycare is that the prices will have risen, the deductibles on their insurance will have risen, and their disposable income will not. They can't afford it now, when the prices are lower. The subsidies currently planned are nowhere near enough to make up the difference for the lower class wage laborer,

Medicare is not available to most people working and trying to save for their retirement. They are too young. They must obtain medical insurance and pay for uncovered care on the private market, including in many arenas not usually noticed by the bookkeepers such as car insurance and homeowner's liability policies. The very high and increasing costs of all this reduces their opportunities to save money for retirement by thousands of dollars a year.

The attempt to expand Medicare to younger people failed (Medicare has the lowest overhead and other costs of any US health care payer, so expanding it might actually lower US health care costs - Romneycare of course excluded any such socialist provisions). So we expect the current difficulties in paying for medical care and insurance and so forth to remain the obstacles they are to adequate retirement savings.

That's all. No big subtle point here, just observing one of the several significant aspects of Americans's failure to save "enough" for retirement. High gas and utility prices would be another. Large college loans yet a third. The point was to counter, to a degree, the facile presumption that the whole problem was some kind of character flaw or imprudent lifestyle effect - working Americans are newly pressed in ways some others (including the past generation of Americans) are not.

 

A couple of things Buddha12, assuming your survey is true, your conclusion is not supported by your survey, just because 57% of surveyed workers had less than $25,000 in savings it doesn’t mean they didn’t earn enough money to save for retirement.

 

I am still looking to see the “text book” on bubbles I asked you for in my previous post. I am already on record in regard to The Great Recession. I have written about it several times here at Sciforums. The Great Recession was not in any way caused by a “housing bubble”. That is a myth, pure and simple.

 

Just what is a “bubble” exactly? Markets are constantly adjusting pricing as information is always changing. So if your definition of a bubble is a price decline for a particular good or service, there are bubbles everywhere and all the time. Information changes and prices also change. It happens all the time. It’s what markets do. So to say as you have done that because prices went down on a particular day and in a dramatic fashion is was a bubble is playing fast and loose with the fact and with reason.

We have had real estate debacles in the past (e.g. The Savings and Loan Crisis of the 80’s and 90’s) where a quarter of the nation’s savings and loans became insolvent. I will repeat myself since you are a little slow on the uptick, what caused The Great Recession of 2007-2009 was the liquidity crisis created by off balance sheet risks created by unregulated derivative trading. If it was just a case of bad loans or a price adjustment it would not have created a problem. Markets deal with that all the time. Price is what a buyer and seller is willing to pay for a particular good or service at a given time based on known information. There is nothing magical about it. It’s no big deal. What is a big deal is when market participants discover new information. And the information discovered which led to the Great Recession was devastating – banks, shadow banks, and other institutions had huge and unknown liabilities that rendered them insolvent. They couldn’t pay their bills and the money of their depositors, your average Joe’s and Jane’s and investors of all stripes was in serious jeopardy. That is what caused The Great Recession. And for some reason people like you, are seeing bubbles…bubbles everywhere and failing to see the big semi barreling down on you.

Then do some homework. It really isn’t that difficult.

“CBO and JCT now estimate that the insurance coverage provisions of the ACA will have a net cost of $1,168 billion over the 2012–2022 period—compared with $1,252 billion projected in March 2012 for that 11-year period—for a net reduction of $84 billion. (Those figures do not include the budgetary impact of other provisions of the ACA, which in the aggregate reduce budget deficits.)”
http://www.reuters.com/article/2013/08/27/us-obamacare-like-groups-idUSBRE97Q0ZO20130827

Contrary to your claims, Obamacare has several cost containing provisions in it. One, it require healthcare providers automate record keeping – something virtually every competitive business has been doing for decades. Even the company that mows my law and the company the takes care of my lawn provides me with an automated record of what they did and when they did it. It’s about time hospitals and other healthcare providers caught up with the computer age.

Additionally, it changes how healthcare providers are paid. Instead of paying for service, they are getting paid based on results. And the law provides for the creation of best practices in the industry, again this is something that competitive businesses have been doing for decades. Again, it is about time the US healthcare industry emerged from the dark ages. And Obamacare mandates that advancement.

And then there are the changes Obamacare makes to healthcare insurance. It creates competitive exchanges whereby customers can compare and evaluate insurance offerings encouraging insurance industry competition. Obamacare further limits health insurance profits, just as we regulate utilities other monopolies and oligopolies.

So you can close your eyes, plug your ears and scream. But it won’t change the fact that Obamacare contains some serious cost containment provisions. And we are already for the first time in more than a half century seeing a slowing of the growth in healthcare costs even before these provisions have been fully implemented.

New York’s healthcare costs are projected to decline by some 50% next year with the full implantation of Obamacare.

http://www.nytimes.com/2013/07/17/h...rkers-set-to-fall-50.html?pagewanted=all&_r=0

Romenycare mandates coverage. Obamacare mandates coverage and it makes healthcare coverage affordable. I suggest you look at the subsidies. They are pretty generous. If people cannot afford coverage, it is free to the individual as the government picks up the tab. Just because you want it to be more generous, it doesn’t mean that is not affordable. Romneycare and Obamacare was never intended to solve world hunger or all the problems of the world.

Obamcare subsidies kick in at 4 times the poverty rate. So that is about 46k of income for a single individual and the most that person will pay for health insurance is 10% of their income. The maximum health insurance costs falls dramatically from 9.5% to nothing…to free healthcare insurance.

http://money.cnn.com/2013/08/21/news/economy/obamacare-subsidies/index.html

If your argument is that a Medicare program for all would be better, I would be inclined to agree with you. But that is not what we got and Obamacare is a big step forward over the current healthcare setup. And Medicare is not without its own set of problems. The bottom line here is that Obamacare will reduce our healthcare costs and it will improve the quality of care, and it is a big improvement over the current system of healthcare in the US.

If your argument is that the middle classes are getting screwed, I would definitely agree with you particularly as it relates to tax policies. The huge increase in payroll taxes enacted under the Reagan administration which resulted in huge Social Security surpluses for more than three decades have allowed the federal government to enact huge tax cuts for the wealthy, income tax rates for the wealthy have fallen from 50% to 34% all made possible by the Reagan payroll tax increases and the resulting decades of Social Security surpluses. Middle class Americans are overtaxed and have been for decades in order to pass tax cuts for the wealthiest among us. That is why the wealthiest, the 1%’ters have done so well over the course of the lasts several decades. It is that huge shift in tax burden from the wealthiest to the middle classes.

 

Save today so you can have something for tomorrow

Don't spend next weeks paycheck this week.

 

As you may discover by reading your link there, those are projected savings over prior projected costs, due to significant slowdowns in the growth of insurance coverage costs.

What I am pointing out is that slower growth in costs is not reduction in costs. US medical care right now costs more than most people can afford, twice as much as anywhere else on the planet, and all those projections show it increasing in cost for the foreseeable future. Romneycare is not designed to actually reduce the cost of medical care in the US, see. So that central and overriding burden on working Americans trying to save for retirement remains.

I ran the numbers on the income I had a couple of years ago in a down year, using a couple of major insurance company sites, and it seems that the smallest percentage of my income I would be paying for health insurance on one of these exchanges is about 15% - that is with several thousand dollars deductible, so it won't cover any of my normal health care expenses, and some kind of language in there about "actuarial coverage at 71%" which I think means I pay 30% of the bill also.

That would just about wipe out my retirement savings, at that income level (usually about 15%). So a lot of people are going to take a hit in their retirement savings when they have to buy health insurance, as well as seriously eroding them if they do need a doctor in there.

So we are all agreed on that. Cool.

Meanwhile, the housing bubble that popped in '08 took a significant pile of retirement savings with it - for most middle class Americans the equity in their house is, or was, their biggest chunk of retirement savings, and they lost a lot of it. Their inability to tap house equity for medical bills and other serious expenses, their inability to downsize and take possession of a smaller home with a cash surplus, and so forth, will have an increasingly severe impact as time goes by. But the problem was not an improvident or undisciplined life - the problem was the larger economic forces that trapped them. They did save for retirement - they just got burned.

 

I think most people are not "investors" and that is a problem or will be a problem for most retirees. Most people don't have the education needed or the personal attributes needed to prudently manage their money. That is the problem. During The Great Recession a number of folks, including my brother, panicked and sold off and as a result they lost big time. When the recover happened they were sitting in cash or low interest bonds. When interest rates rise, they are going to get hit again. The don't understand finance. The don't understand economics. That plus a big dose of fear is a recipe for investment disaster. So yeah, this idea of handing pension responsibility off to employees has not worked out too well for a lot of folks. They have been sheep for the wolves.

 

I think the US could reduce the net cost of health care, much like is done in Europe, by having doctors on salary* and eliminating the profit cut insurance companies take. Even the Chinese model for paying for health cost is better. I.e. patient pays 1/3 of actual cost and government 2/3. I don't know how some unsually large costs are paid, but think the government eats them, certainly not private insurance companies, but perhaps other family members. Only a few years ago this division of cost was exactly reversed - patient paid 2/3. Without insurance companies, the typical Chinese saved more than half his discretionary income; but when the CCP decided that it could not rely on US and EU to buy all their factories could produce (and grew increasingly un happy that China needed to lend the funds for their buying), the CCP decided China should become more of a domestic consumer based economy (rather than an export one) That is why they flipped the cost break down but old habits of saving a lot, die hard so the domestic market is not growing as fast as the CCP would like. Hence the CCP is really pushing trade with others who don't need loans to buy. Chinese exports to US were 42% of the total only a few years (6 if memory serves) ago and now are less than 16%.

* There are side benefits to socialized medicine in addition to cost savings. The people choosing to study medicine are not motivated by the prospect of gaining a big fortune, but because they want to help the sick and /or find the subject interesting, etc. Also they get the same pay, within limits, if the take more time with patient than US doctors do. In US "fee for service" billing system every extra 3 minutes spent to really understand the patient's problem is dollars out of the doctor's pocket. One side effect, not often mentioned but very important, is the medical records are in a standard format in one computer system. This makes research rapid and cheap. If AIDs had broken out in London, instead of California, its cause, how it spread, etc. would have been almost immediately understood, not a five years guessing game. AIDs might not even exist today or at least would be very rare. The socialized medicine computer knows your grandfather had diabetes and died of prostate cancer, so keeps a closer eye on your health for these problems. Centralized birth to death records are very valuable, yours in the US don't exits - they are a few years of illegible scrawls in the MD's hand writing in have a dozen different filing cabinets if none in the city were you lived 10 years ago, etc. even still exist.

All this extra cost and less well treated illness over your working life time adds up making retirement less affordable.

 

Data on Social Security (prior to 1.7% cost of living increase now taking effect) is here, including:

SS's average per capita pay out in 2014 was $1186/ month ( = 70,000 / 59 as if collecting other than retirement benefits, you get less, on average.) For at least the net decade the SS payout will grow faster than the population as "baby boomers" are retiring at more than 10,000 per month rate. More important is that immigrants, who pay much smaller SS tax are a growing part of the work force. They make up 11% of the US population, but have 23% of the babies born each year. Their lower average SS tax payments with the general trend of more than a decade for purchasing power of salaries to decline yet SS benefits are index to have approximately constant purchasing power are other factors (in addition to aging population distribution) stressing SS.
Fools.com credits SS administration as source of their facts.

On January 18, 2015 US population was 320,213,000* and 6 times "nearly 59,000,000" < 354,000,000 I.e. nearly 1 in 6 Americans is collecting from the SS Administration. In a decade or so, it will be 1 in 5. This is not stable and partly caused by medical science - life expectancy of a 62 year starting to collect SS is increasing faster than the average. Perhaps the government needs to give out free cigarettes to all collecting SS?

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Congress likes to give out things - they could agree to do that, if not on anything else to "save SS."
* Data on all countries is tabulated here: http://en.wikipedia.org/wiki/List_of_countries_and_dependencies_by_population

 

It would be prudent to raise the age at which you can collect SS. That would help allot. Not allowing early retirement collecting from SS would also be helpful. By doing those 2 things they could ease the cash flow out of SS over the coming years.

 

They did that already. It doesn't work - people get old and injured and sick and end up on disability, which is more expensive than regular SS - and it hurts the working poor, who have already paid the double rates Reagan mandated to establish the Trust Fund that was supposed to allow them to retire at 65.

What would help more would be restoring the income and capital gains tax structure under which the modern Social Security was set up, to pay back the money borrowed from the Trust Fund.

Another obvious and sufficient step would be removing the income cap on the Social Security deduction. Since almost all gains in income in the US have gone to incomes above that cutoff, the economic growth of the US that was calculated to support the system has instead been tax sheltered from Social Security - end that damaging folly.

A third would be an income cap on receiving benefits - the intention of SS was never to buy sun hats for rich people's racehorses.

 

good suggestions. Too bad they are dead in the water and DOA with Republicans in control of Congress.