Retirement is a construction of modern society. It was created when the German chancellor Otto von Bismark succeeded in launching the first social security program in 1889. The introduction of social security followed a decade of smaller workers’ programs addressing the economic insecurity at that time. By the end of the Second World War, the UN General Assembly adopted the Universal Declaration of Human Rights, whose Article 22 recognized that “Everyone, as a member of society, has the right to social security . . . .”
Americans, 120 years later, are now revisiting the “right to social security.” With an increasing older population, lengthening of life expectancy, diminishing personal savings, and an elusive government social security fund, we have started questioning the viability of retirement. Although current discussion under the Obama administration centers around raising retirement age and reducing benefits, a more radical debate centers on whether we can afford retirement at all and whether we deserve it. In San Diego, retirement news has become synonymous with the greedy geezers syndrome. The reality is however more complex.
Variations in wealth among older Americans are striking. Americans in the lowest fifth of the wealth distribution spectrum have little, or negative net worth. This contrasts with households in the highest fifth, averaging $1.5 million and $800,000 net worth. The recent downturn in the economy will see more people pushing back retirement. One survey found that about 40 percent will delay retiring by four or more years.
It seems that many Americans are still shell-shocked after losing much of their 401(k) nest eggs during the last two years. Even though many workers might have partially regained some of their investments, others are still concerned about their ability to save for the long term. Only 16 percent of baby boomers said they have confidence in their ability to save enough for a comfortable retirement. The rest—83% of the baby boomers— intend to keep working after retirement. A hardy group (14%) is reporting that they will never retire from their current job. But sometimes we have no choice.
Health problems can have a big influence on the decision to retire early. One analysis suggests that poor health is a stronger influence than financial variables on people's decisions to retire. Financial well-being is strongly related to the health of both partners. Average household net worth was $31,000 when both partners were in poor health but more than $400,000 when they were in excellent health. People who had a major unexpected health event, such as heart attack or stroke experienced an average cumulative income loss of nearly $37,000. On average, loss of earnings, rather than out-of-pocket medical costs was the major factor in the loss of wealth.
Studies show a consistent lack of knowledge among older workers about their pension plans. Lack of knowledge appears to be related to lower savings and wealth. Such findings underscore that education about retirement planning makes a difference in how we plan for our future. Staying healthy to enjoy the benefits is another story altogether.
Mario Garrett PhD is a professor of gerontology at San Diego State University. He can be reached at mariusgarrett@yahoo.com © Mario Garrett 2011 blogs at http://iage-marius.blogspot.com/
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