Retirement
A pop media topic is retirees are suffering and struggling in retirement, with some moving overseas to afford retirement. The media doomerism is so bad that 61% of those nearing retirement think they will not have enough money.
But US government data says 85% of retirees say they are doing “okay financially” – which conflicts with media doomerism.
The media, driven by corporate press releases selling financial services and insurance, has intentionally and unnecessarily frightened the public about retirement.
Example news stories:
“Key Points
The median retirement savings for American households is $87,000.
Median retirement savings for Americans younger than 35 is $18,800.
67% of Americans have a retirement account but only 34% feel on track for retirement”
Another one:
“In 2022, almost half of American households had no savings in retirement accounts, according to the Survey of Consumer Finances (SCF). These accounts include individual retirement accounts; Keogh accounts; certain employer-sponsored accounts, such as 401(k), 403(b), thrift savings accounts; and pensions.” (a “thrift savings plan account” is not a regular bank account but a type of retirement account – see https://www.tsp.gov/)
One more:
“But many Americans are in a similar spot. Vanguard’s How America Saves report shows the median amount Americans have in defined contribution plans at age 55 to 64 is just $87,571.”
And another that looks only at 401(k) accounts: A record number of Americans now have $1,000,000 saved in their 401(k)s — but it’s probably fewer than you think
The $87k figure measures only the value of “retirement accounts” – IRA, 401(k), etc – AND DOES NOT INCLUDE savings accounts, checking accounts, bonds, stocks, life insurance, real estate, pension income, Social Security income and other financial assets. The $87k figure comes from the Federal Reserve: https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Retirement_Accounts;demographic:all;population:1;units:median
The $87k figure is a highly misleading media “factoid” that leaves out the majority of retirement assets and income. Here’s another fake news article quoting this number: Here’s how much the average American couple has saved for retirement — how do you compare heading into 2025?
Second, this is a survey of all ages – obviously, older people with more years of savings have more money set aside than those in their 20s… duh. Thus, the $87k figure has little to do with the actual retired segment at age 65+.
Third, The Survey of Household Economics and Decision Making (2023), says that for those in retirement, 80-85% of retirees are doing “okay financially”.
“While retirees as a group had generally high levels of financial well-being, this varied depending on the individual’s sources of income. In 2023, 80 percent of all retirees said they were doing at least okay financially. Among retirees whose family income included wages or other sources of labor income, a higher share (85 percent) reported they were doing at least okay financially”.
The $87k figure presented in the media leaves out the following income (Federal Reserve survey data):
- Over half of current retirees have pensions (which may not be true eventually), and most have social security.
- About 80% own their own home, which reduces expenses. Many have other benefits (e.g. VA, etc).
- Many have other assets (their home, other real estate, stocks, bonds, small business, etc)
Most retirees are not living extravagant lives and traveling the world – the picture painted by frequent stories about retirees who are doing well. But most retirees describe their lives as “comfortable”.
“Americans Flock Overseas to Afford Retirement”
Another meme is Americans are flocking overseas to retire because they cannot afford to retire in the U.S.
But data: An estimated 0.7% to 1.3% of Americans retire abroad – which is close to zero.
Of those, an estimated half were already dual citizens, had close family ties, or were Americans already living in the destination country (example – an American family living, working and with permanent residency in Toronto – who chose to retire there since that’s where their owned home has been for 20 years). Some dual citizens return home to their birth country for retirement and to be closer to families.
Almost all of these stories are planted by relocation specialists/firms that help people move to another country.
Long Term Care Insurance Sales
I recently turned 65 and was a sales target for LTCI. For most people, LTCI is a scam – but they use persuasive sales techniques.
They tell you 70% of us will eventually need “long term care”, citing a US HHS report. When you hear “long term care” you are thinking assisted living and skilled nursing. But that is not how HHS defined long term care in their report.
HHS defines “long term care” as needing help with yard work, housework, shopping, groceries and so on – and says most “long term care” is provided by family members, or friends, or hiring a gardener. It’s not expensive skilled nursing …
LTCI typically has a 60-90 day “deductible” – you pay the first 60-90 days out of pocket. Most people who need care use less than 90 days …. and finally, there is a tiny % that require 1-3 years care, but LTCI policies are typically capped at 6-12 months total.
The LTCI industry plants news stories saying 70% will need “long term care” and your retirement is going to be awful (unless you buy our product).
Why Does the Media Run These Stories?
Most media stories are initiated by press releases and public relations contacts. Financial planning, investment banks, and LTCI companies push scary stories to sell financial and retirement planning services. Fear is a powerful motivator, is more likely to be “clicked” on, and people who are emotionally riled up are more likely to succumb to advertising messages. These stories are a “win win” for all of them.
Here is one of the very rare media stories that gets it correct: 5 signs that US retirees are richer than they think
Most Retirees Are Doing Better than as Presented in the News
From the data, most retirees are doing okay.
While not everyone has an ideal retirement, the majority of retirees -based on data- are doing better than the bleak portraits presented by planted media stories.
Compare today to 65 years ago. In 1959, an estimated 1/3 of those age 65+ lived in poverty, by 2008, just 10% live in poverty – about the same % as the overall U.S. population. In 1959, health care was paid out of pocket – Medicare did not yet exist.
Factfulness
This gets us back to Factfulness – much of what we think we know is probably wrong or misleading. I assume everything I thought I knew is probably wrong – and that usually turns out to be the case, unfortunately.
