Retirement crisis: Impoverished seniors on horizon

An annual survey confirms that Americans are living longer and that they do not have nearly enough saved for retirement.

By MSNMoney partner Mar 19, 2013 10:46AM
By Bob Pisani, CNBC

The Employee Benefit Research Institute has published its annual Retirement Confidence Survey, which confirms what virtually all such surveys have concluded: that Americans are living longer and that they do not have anywhere near enough saved for retirement.

The sad truth is that Americans do almost no thinking about what kind of retirement they want. They mistakenly assume that Social Security is a retirement program, when in fact it is a supplemental retirement program. The three legs of the retirement "stool" -- Social Security, a pension, and private savings -- have all seen some shrinkage in the past few years.

For Social Security, all baby boomers know the truth: We are going to be working longer, into our 70s, paying more and getting less. Pensions are going away: IBM stopped providing pensions to new employees a couple years ago, and many are facing reductions in their benefits.

And private savings? Let me quote from the survey: 57 report having less than $25,000 in household savings and investments (excluding their home and pension benefits). This is for all workers, so older workers would have more money, but other surveys show the results are equally paltry.

This is just the tip of the iceberg. American households are so strapped that only half could come up with $2,000 in cash if an unexpected need arose in the next month.

You would think that savings levels would increase, but no. The percentage reporting saving anything for retirement is at 66 percent, down from 75 percent in 2009.

People are also living much longer than their parents. A male reaching retirement age in 2013 is expected to live to an average of 85, a woman to 87.

What this means: A retirement crisis is looming. In a little more than a decade, there will be a lot of older people who will run out of money. There will be stories written in 2025 about Joe Smith, 82, a retired autoworker, living in a flophouse on $2,100 a month in Social Security after his pension was cut off and his personal savings ran out, while his children, in their 60s themselves, moved 2,000 miles away.

© 2013

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Mar 19, 2013 11:17AM

Our economy is built on consumption and not saving money for retirement.  You must start early and be consistent throughout your working life, but you must also have a rainy day fund, stay away from credit card debt, having car payments all the time and generally living on less than you make - which may mean "LOOKING LIKE" you do not live the life your friends and neighbors seem to be living, but probably are not in reality.


I just purchased the first automobile in 14 years on Dec. 28, 2012 since I purchased a 1992 Honda Accord in October 1998 with 52.5K miles.  In December 2012 it had 288K plus miles.  I did not purchase a new automobile, but a 2008 Toyota Avalon XLS with 33.8K miles.  Less than $20K.  So the original purchaser paid for the bulk of the depreciation and since it is a 2008 the insurance is less.  The vehicle still has a year warranty left it looks brand new.  Best of all I paid cash.


Credit cards have enabled people to live a higher life style then they actually can afford.


I have never made a six figure yearly income, but have lived below my means, saved first and spent what was left.  I have my father to thank for this learned behavior and I am happy I have stayed the course. 

Mar 19, 2013 11:43AM

I'm in my early thirties.  It is obvious to me that I will be means tested out of social security because I have been saving for retirement for over ten years.  I feel sorry for those who are going to "live" on social security, but it is the price they are going to pay for not saving.  


I know people will say they paid into the system and they should get the benefits, but remember the government defined your contribution as a tax.  It's a tax to me, and the sooner people realize the government is out of money the better.  I still hold out hope that the folks in DC can get together and solve the long term financial issues the country faces.  I will however continue to prepare for the worst while hoping for the best.


Mar 19, 2013 11:42AM
The bottom line is financial education starting, at the very latest, in high school.  Start with how devastating credit card debt is to your financial future. Teach people, in the simplest terms possible, about how extremely important it is to learn how money can work for you if you know how to use it correctly. And how it will, ALWAYS, work against you if you don't.
Mar 19, 2013 11:42AM
I'm nearing retirement but my wife and I are fully confident we will be debt free, investment rich and ready to have a fun.  In fact, we will be retiring in are late 50's in just a few years.

No pension, no inheritance.  But what we did was start putting $ in our 401ks, IRA's and other taxable investments as soon as we had our 1st full time jobs. Started at 10% and worked our way up to 30% as of now at the ages of 54 & 51.  We also had 3 kids and my wife was a stay-at-home mom for 20 out of 30 years of marriage.

The key was living frugally, fixing things ourselves, camping vacations, used cars and taking lunch to work.  Oh, and most importantly, no EOC (Economic Out-Patient Care) to our kids.  They earned college scholarships, bought there own cars and live independently on their own.  Why enable them?  Why add to the volumes of other entitlement minded doofusses of the gen X and Y's?  In my opinion, that is the number 1 reason baby boomers are going to have crappy retirements.  They can't say no to their spoiled brat kids no matter how old they are.

Baby boomers have to be the stupidest generation ever.  Well, until gen X & Y start retiring. 

I'll be enjoying my early retirement and going to Europe, Alaska, golf etc...  Young people, take note on how it is done. 
Mar 19, 2013 11:36AM

Ah yes, the 3-legged stool. Alias, 3 ways to crap on you:


1.) The legislators stole your money from the SS fund.

2.) All pensions were reduced or eliminated.

3.) You're no longer 'entitled' to the money you contributed to SS.


Reasoning: The gubmint needed more money. Corporations needed more money.

You don't need no more stinkin' money!


"The sad truth is that Americans do almost no thinking about what kind of retirement they want. They mistakenly assume that Social Security is a retirement program, when in fact it is a supplemental retirement program."


I've seen similar stats elsewhere, but I just don't get this. Do people old enough to be reaching retirement age really think this way?  I understand kids in their teens and 20s not really 'getting it', but I'm amazed that older adults are so clueless. I'm not talking about those who've lost jobs or had emergencies that wiped out some/much of their savings, but those who actually think they'll just quit working one day and let social security fund the rest of their lives.


We 'woke up'  a few years ago when we were in our late 40s and suddenly realized that the day was actually coming when we could retire. Realizing we were not heading, financially, in the right direction, we put our focus on funding retirement plans, and though we still have a ways to go, we will have had about 20 years of retirement savings, and no debt outside our mortgage. Certainly, we are counting on SS to supplement our retirement, but by no means are we seeing that as supporting our way of life.

Mar 19, 2013 12:09PM
At least we have money to give to Syria. We need priorities after all.
Mar 19, 2013 12:20PM

Exactly, how are American suppose to save for retirement?


 My wife and I have been contributing to 401K  each years, we have 1 daughter in College (we help as much as we can), and two more daughters in grade school.  In the past several years, our bills have increased, taxes , housing, insurance co pays etc...out pacing our annual pay increases. The 401-k is a joke  the maintence  costs eat up a portion of proceeds.. Considering the two of us have been making slightly over 100k a year for the past several years that mean on average we will contribute (employer and employee contributions) about 13-K this year to Social Security.  I estimate over our lifetime we will have contributed (between employer and employee) roughly $ 350- 400K  If we had access to that amount in dividend stocks (Blue Chips such as-- KO, PEP, MO, PG PFE etc..) it would work out nicely for us combine that with our 401-k  and small pension option. we could retire comfortably.


Somehow, Social Security will penalize us for helping our kids with college, our  decision to fund a 401k's and  small pension . We go would out things to fund this, maybe I should blow all my money on fancy vacations, drinking, new cars, elaborate weekends, lottery tickets and put my hand out.


I know I will work in my retirement so I am not bored, but I feel that the honest Joe is getting  a snow job. Social Security pays to those who choose not to help themselves but laze off of others.

Mar 19, 2013 11:44AM
The Govt pension plans have to share some of this burden with our pain! We never hear about their cut backs!!!!!
Mar 19, 2013 11:34AM
All this debt that falsely propelled our economy for 2 decades is coming back to bite us.  Investing in mutual funds and/or 401k plans is all fine and good, but if you continuously have car loans, mortgage debt, credit card debt, etc... throughout your working life, you're not building nearly the amount of wealth you think you are.   Sad to see some who can't retire in their mid 60s because of their mountain of debt.  And if they are debt free, there's no place to put their cash to protect it and earn a decent return.
Mar 19, 2013 11:43AM
Try that on today's AVERAGE earnings raising children with the cost of housing and goods. Unless you suggest they should live in tents. Exploited labor because the cost of China labor has brought down standards here. What did you think was going to happen it was inevitable. Their standards go up ours go down.
Mar 19, 2013 12:38PM
Americans are in a lose-lose situation since the demise of defined benefit pension plans. If we save more the economy suffers and we lose our jobs. If we spend more the economy gains but we don't have any savings for retirement. Government policies in the areas of trade and taxation don't favor most Americans. They mostly benefit corporations whose interests are opposed to the interests of average Americans. I don't see any solution to the problem. Old folks will be thrown under the bus. The rest will need to lower their expectations. It's not morning in America!  Perhapsmourning is a better word. 
Mar 19, 2013 12:14PM
Look what is happening in Cyprus. The government raided peoples savings accounts and helped themselves. Believe me folks when I tell you it is coming to America. Thanks to the Obamacrats, we are being spent into national bankruptcy and Uncle Sam will be coming after your savings account, your mutual fund account, your pension account, your IRA and 401K accounts and yes......our Social Security and Medicare which Obama is already doing. I stand corrected:  Its not's HERE! 
Mar 19, 2013 11:30AM

Unless economy grows, there is a problem.


Reserve bank has not helped. With zero interest many retire what ever little saving they may have is earning no interest and income from that, that can add and that can really count on small base.


there is a false belief that people pay less and get 3 times. They do not count appreciation of currency and total value of installment payments. If I paid 500 dollars to social security in 1960 that will be in today's terms about 2000 dollars and interest amortized will surpass 10000 in current dollars.


Then there is a cultural problem about letting one die rather than give ineffective , unnecessary hospital services at high cost that keep you in vegetable state in a bed at tremendous cost. We need to lead a strong campaign that says it is better to die at certain stage of health and quality of life.


When kids are multimillionaire, they should undertake care of their parents and grandparents. This is also cultural thing and will have to deal with on worldwide basis. It is OK to have three generation living together. It gives a higher quality of life to everyone at substantial savings. The days 18 and our and it is Government's job to take care of old people is passe. If we continue that we will destroy economic viability of society and quality of future citizens.


We need strong national dialogue where we talk win win for all by defining what kind of social compact we need across generation and what are our values that are practical and conductive to a greater total happiness.

Mar 19, 2013 12:11PM
How much easier would it have been if no one had lost their good paying jobs or had to deal with long term unemployment.

Is it easy to save for retirement? Not really; it takes a conscious effort. But it can be nearly impossible to save for retirement if you've had to deal with long term unemployment, under-employment, and/or massive medical bills or any of life's other unexpected "surprises".

Government and WS can go to he11.

Mar 19, 2013 11:35AM
Seniors need to start looking at retiring outside of the US. A place where the cost of living is much lower if they want to insure a quality life. The government should allow retirees to leave and provide a lower tax rate on investment income for them, if they go. Go to South America, buy health insurance for $130.00 per month and waive medicare. We need to lower our costs for medicare and this is one way to do it. For 5 generations people have come to America for a better quality of life. Now it may be time for seniors to go in order to enjoy a better quality of life.  
Mar 19, 2013 12:36PM
And now Obama quickly throws into the budget fix-mix the chained consumer price index as the coup de grâce.

Mar 19, 2013 11:19AM
I wonder how many of them have kids to look after them if they get sick?
Mar 19, 2013 1:19PM
There was a time if you had any descent savings you could have expected to gate a rate of return from a bank, where your money was safe of about 4 to 4/12%.  Thanks to Government deregulations (and you can thank those politicians who believe there is too much regulation in our country) banks can now offer zero percent to have your money safely stored in their vault.  Oh while we are at it young people, let the politicians also convert your safe Social Security into the stock market.  They want to make sure that when you turn 67 or so that you actually will have on a pot to pis in and no savings. 
Mar 19, 2013 1:21PM
More MSN gloom and doom BS to keep you working until you die. I'm not saying you shouldn't save to supplement social security, I just saying you can't live every day of your life in fear. There is no guarantee that you will wake up tomorrow.
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