More Americans prepared for retirement, but almost 40 percent face lower living standard

Social Security commission so far fails to gain much traction in Congress

The percentage of American retirees facing a lower living standard fell to 39 percent, according to a recent Federal Reserve report.

The National Retirement Risk Index declined from 47 percent in 2019, with the current level being the lowest since that measure of how many Americans confront a lower living standard than before retirement was formed in 2004. The index rose from 41 percent in 2007 to 51 percent in 2013 before dropping, Boston College’s Center for Retirement Research reported.

Retirees' finances have been boosted by increasing housing and stock prices and government support during the pandemic, researchers noted. The biggest factor driving the improvement in prospects for most retirees was home values.

"The strong growth in the housing market reduced the share of homeowners at risk by 10 percentage points, while the share of renters at risk stayed fairly steady," the CRR reported. "But most households do not tap their home equity in retirement and home prices may not remain at historically high levels. The bottom line is that even a conservative estimate shows a substantial portion – about two-fifths – of today’s households will not have enough retirement income to maintain their pre-retirement standard of living."

Social Security commission fails to gain much support in Congress, so far

Some 68 million Americans, including 50.1 million retired workers, 7.4 million disabled people, and 5.8 million survivors of retirees, collected a Social Security check in early 2024, according to federal figures. That's up from about 63 million a decade ago.

The number of Americans older than 65 - the typical retirement age - is expected to increase from some 58 million in 2022 to 75 million by 2035. The average monthly Social Security payout for retirees was $1,905.

The program's growing use fuels proposals from politicians to raise the retirement age and other measures.

The Republican Study Committee, a congressional group of most GOP members, recently released a budget proposal for fiscal year 2025 that calls for raising the retirement age. "We will not now or ever support cutting or delaying retirement benefits for any senior in or near retirement,” Republicans wrote in the report. “With insolvency approaching in the 10-year budget window, Congress has a moral and practical obligation to address the problems with Social Security.”

Republicans also support reforms to how the disabled are paid through the program, converting that "to a flat benefit structure that increases benefits for low-income workers and removes benefit cliffs.”

Many Democrats focus on raising taxes on mostly wealthier Americans. The White House said the Republican Study Committee's proposal “cuts Medicare and Social Security while putting health care at risk for millions" by gutting the Affordable Care Act, known as Obamacare.

Democrats would "make the wealthy, big corporations, and special interests pay their fair [tax] share," extend Obamacare tax credits, and expand Medicare's "ability to negotiate lower drug costs," according to the White House.

Earlier this year, the House Budget Committee approved a bill that would form a 16-member fiscal commission to review Social Security and other programs. That idea has been met by wide opposition from groups and individuals across political lines and hasn't gained the support of enough Congress members to become reality.

Some expect the commission proposal - called a "death panel" by a few Democrats - to gain more support after November elections when Congress members don't face immediate repercussions for their actions.

Many seniors are surprised to find that Medicare has gaps in coverage and premiums that can increase.Photo byKevin Shay

Many don't realize costs of Medicare

Medicare is another growing federal program that faces calls for changes. The number of Americans enrolled rose from about 53 million in 2013 to 66.9 million in late 2023, according to federal figures.

A little more than half are in traditional Medicare that carries higher premiums, while the rest sign up for Medicare Advantage plans, which are similar to HMO programs.

Some 52.4 million have a stand-alone prescription drug plan under Medicare Part D.

Many people are surprised to learn about the gaps in Medicare health coverage that make it almost mandatory to purchase supplemental insurance, said Elly Williams, a Medicare specialist with the Frederick County Division of Aging in Maryland.

"It can be confusing since it's a complicated program. It doesn't cover everything," Williams said. "There are costs that can add up over time, and you have to sometimes guess on what coverage to add, based on your personal situation."

Traditional Medicare only covers about 80 percent of typical costs, so patients can get stuck with large bills if they don't have supplemental coverage, she said. The Medicare Advantage plans also often don't cover as much as advertised.

"It's important to educate yourself and make informed decisions," Williams said.

Coverage can be changed for a time period after first signing up, and some parts can be changed each year. But it can be difficult to switch plans after six to twelve months, she said.

Government aid to help pay for Medicare premiums can be hard to obtain since after age 65, most programs require enrollees to have few assets, such as stocks and funds in bank accounts.