April 02, 2024
What would you call it when the median wealth of people between the ages of 55 and 64 rises by 47.4 percent in three years? If you’re CNN you would call it a retirement crisis. I wish I could say that I’m kidding, but that is the headline, “retirement crisis looms as Americans struggle to save.”
While CNN has touted and invented just about every piece of bad news imaginable since President Biden took office, this one might take the cake. The data on wealth is not hard to find, it comes from the Federal Reserve Board’s triannual Survey of Consumer Finance (SCF). The SCF showed sharp increases in median wealth for every age group.
Perhaps I missed it, but I don’t recall any CNN pieces on the retirement crisis in 2020 when people close to retirement had considerably less wealth. Maybe I’m just old-fashioned, but it seems if people have less money as they approach retirement, they are more likely to face problems in retirement than if they have more money.
To be clear, there are real retirement issues facing today’s workers. Traditional defined-benefit pensions have virtually disappeared outside of the public sector. While many workers have accumulated substantial sums in their 401(k) plans, most have not.
The largest source of wealth for the median worker is their home. Having more wealth in your home does mean you can borrow against your home, if necessary, and can pocket a substantial sum if you sell it, but it’s not the same as having a financial asset that can be freely used to support yourself. (Almost 80 percent of people in their late 60s are homeowners.)
It would be good if more workers had substantial sums accumulated in 401(k)s. Toward this end, President Biden signed the Secure 2.0 Act, which requires mid-size and large companies to enroll their workers in 401(k) plans. (Workers can opt-out if they choose.) He also imposed tougher rules on the financial industry to limit its ability to charge high fees on retirement accounts.
There is more that can and should be done to facilitate retirement savings, for example, the government could make a low-cost retirement plan, like the federal employees’ Thrift Saving Plan, available to all workers. This could substantially reduce the money wasted on administrative costs, allowing workers to accumulate more towards their retirement. But by almost every measure workers are better prepared for retirement than in 2020.
It is understandable why Donald Trump would like to see major media outlets touting a “retirement crisis” in this election year. It is not clear why a serious news outlet would do it.
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