The financial crisis of Americans in their later years

In the United States, the issue of retirement savings is increasingly causing concern. A recent national survey of working age Americans showed that 79% of people believe that the United States is facing a retirement savings crisis, an increase from 67% in 2020. More than half of Americans are concerned that they may not be able to achieve financial security after retirement.

Firstly, the data does indicate that Americans' concerns are not unfounded. In fact, for most Americans, retirement security seems out of reach. Especially middle-class workers, they are far from sufficient in accumulating sufficient funds for an economically stable retirement savings. According to the National Retirement Risk Index, even if one works until the age of 65 and converts all financial assets into an annuity, half of American households will not be able to maintain their standard of living after retirement.

Taking Generation X (born between 1965 and 1980) as an example, they will soon face retirement and are the first generation to shift from fixed benefit pensions to 401 (k) and other defined contribution plans. For Generation X, the lowest half of the income earners have only a few thousand dollars in retirement savings. Although the average savings of typical Generation X households exceed $243000, the median retirement savings of households are only $40000. This means that the vast majority of Generation X do not even have enough savings to cope with retirement. Given the severe retirement situation faced by Generation X, this is not surprising. Most Generation X do not have a pension plan, have experienced multiple economic crises, and their salary growth has lagged for many years in their careers.

Secondly, savings plans are not widely adopted in the United States, which is also an important component of retirement savings. Almost half of private sector employees aged between 18 and 64 have not chosen to save for retirement. This makes work crucial, as numerous studies have found that wage deductions are crucial in helping families establish retirement savings and retirement security.

Furthermore, as Americans cope with rising costs, saving for retirement will only become more difficult. The constantly rising costs of housing, healthcare, and long-term care have caused financial distress for many Americans. 73% of respondents stated that recent inflation has made them more concerned about retirement issues. 87% of respondents are concerned about a general increase in costs, while 80% of respondents are concerned about an increase in long-term care costs. A recent report found that the number of Americans aged 65 and above who bear the burden of housing costs has increased, and the increase in healthcare costs is particularly severe for elderly Americans who are more likely to suffer from various chronic diseases. The increase in long-term care costs is due to the increasing number of elderly people requiring long-term care each year, which is an increasingly serious challenge for many elderly Americans.

Currently, to plan their retirement life, Americans must estimate the required income, convert it into US dollars, and plan a savings rate to reach that amount. In addition, the years after retirement may be a period of low efficiency, as retirees must ensure that they spend their savings at the right pace to avoid depletion.

Overall, until US policies can address the provision of cost-effective retirement plans and defined contribution plans, thereby providing effective post retirement support, too many Americans will continue to strive to accumulate sufficient retirement savings to maintain a standard of living after retirement. Due to the lack of a federal social insurance program similar to social security to fund long-term care costs for Americans, many people will face financial risks in their later years.