Americans say they have enough money in retirement

SAN FRANCISCO (KCBS RADIO) – Many Americans were able to relax a bit Wednesday when the Bureau of Labor Statistics revealed that 12-month inflation again ticked down . Is this a sign that younger generations will be able to maintain the standards set by older generations?

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As of late August, three out of four retired Americans said they had enough money to live comfortably, according to Gallup polling . That figure was consistent with retiree perceptions for around two decades, based on Gallup Economic and Personal Finance surveys conducted each April.

Those who aren’t retired yet didn’t have the same rosy view of the future .

“Just about half of nonretirees, 45% this year, say they will have enough money to live comfortably when they retire, much lower than the experience reported by retirees themselves,” said Gallup. CNBC’s August 2024 Your Money retirement survey also found that 82% of American workers said it is much or somewhat harder to have a comfortable retirement now than it was for their parents’ generation.

Concern about retirement may be due to several factors, including college debt, slow wage growth compared to consumer prices, and high inflation and interest rates that have persisted in the wake of the COVID-19 pandemic. However, Gallup noted that non-retirees have historically had a gloomier outlook regarding retirement than their already-retired counterparts.

“This retirement reality versus expectations gap has persisted since Gallup began systematically collecting this information in 2002, although there has been some variation over the decades in nonretirees’ expectations,” Gallup explained.

For example, when the current cohort of 65 to 80-year-old retirees were asked about their retirement outlook in 2002-2004 (when they were in their 45 to 60 years old), a little more than half thought they would be able to live comfortably in retirement. Today, 79% of the same cohort said they have enough for a comfortable retirement.

Gallup traces the disconnect back to several factors. Downsizing, reduced childcare costs, reduced travel expenses, Medicare coverage and Social Security can all help bring down costs people were used to prior to retirement. While retirement plans such as 401ks can help bolster retirement plans , a majority of retirees (58%) surveyed from 2019 through this year said Social Security benefits are a bedrock of their financial security.

At the same time, only 35% of nonretirees said they expect Social Security to be a major source of their retirement income. When the current cohort of currently 65 to 80-year-old retirees were asked that question around 20 years ago they said the same thing. Now, more than 60% of that cohort report that Social Security has turned out to be a major source of income.

While Social Security has helped Americans exceed their retirement expectations, there are some concerns about the future of the program.
This May, the Social Security and the Medicare Board of Trustees said that full Social Security benefits are expected to run out in 2035 .

“A research study conducted by Gallup and West Health from November 2023 through January 2024 found that 80% of Americans 62 years of age and under are worried that Social Security will not be available when they are eligible to receive it, up from 75% two years ago,” said Gallup last month.

The idea of Social Security benefits running out in around a decade may indeed seem a bit terrifying considering the Gallup survey results.
Things may not be that dark though. According to the trustees’ report, funds are actually expected to last through one extra year than previously projected in 2023.

To keep Social Security going, it is important that Americans keep working and that their wages keep growing, according to the Social Security Administration. Contributions from Americans’ paychecks is what keeps the program going.

“This year’s report is a measure of good news for the millions of Americans who depend on Social Security, including the roughly 50 percent of seniors for whom Social Security is the difference between poverty and living in dignity – any potential benefit reduction event has been pushed off from 2034 to 2035,” said Social Security Commissioner Martin O’Malley in May. “More people are contributing to Social Security, thanks to strong economic policies that have yielded impressive wage growth, historic job creation, and a steady, low unemployment rate. So long as Americans across our country continue to work, Social Security can – and will – continue to pay benefits.”

While a jobs report from the U.S. Bureau of Labor Statistics released last month indicates that the U.S. labor market is cooling, combined with lowered inflation that’s a sign that the Federal Reserve Bank will lower interest rates. According to J.P. Morgan, it looks like things are “ slowing but not breaking .”

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