Forty-one percent of Americans have no savings at all. An article in Forbes cites data that shows that just 37% of Americans have savings to cover an emergency that costs over $500.
…Simply put, most Baby Boomers will be down to subsistence living by the time they are 80, living on Social Security and other government benefits, with help from any capable children.
He points out that Social Security benefits are typically less than $20,000 a year, and the system is not exactly in robust financial shape. And Medicare does not completely relieve beneficiaries of out-of-pocket expenses.
Perhaps a lot of these people own homes. That would mean not having to spend any money on rent, and in a pinch they could take out a mortgage to finance emergency expenses. Still, I think that a culture of not accumulating financial savings is worrisome.
Why did such a culture develop? Savings rates in America weren’t always so low.
P.S. You could easily say America isn’t Japan or China. Germany or Sweden. We are not Singapore seems like a weird conclusion.
Singapore is specifically named, I suspect, due to the recent renewed enthusiasm over SG’s healthcare system. E.g. https://www.nytimes.com/2017/03/18/opinion/sunday/make-america-singapore.html
Without a reasonable level of personal saving / wealth, moving to a system like SG’s (which, in a vacuum, seems reasonable, even exciting) seems less plausible.
Regarding homeownership, one wonders: What fraction of those homeowners who’ve got little or no retirement savings are already borrowing against their home equity? I can’t find a recent figure, but a 2007 Census Bureau publication states that in 2001, 7.7 million single-family homeowners had home-equity lines of credit; of these, 6.2 million had the HELOC as a junior mortgage, indicating that they hadn’t yet paid off their original mortgage. To the extent that people have already borrowed against their home equity, there’ll be less of it available as a source of emergency funds.
It’d be nice to be able to compare different versions of ‘savings’, from money in the bank, then including all equity positions, then net present expected value of all future income flows, nominal and imputed.
Not having to pay for rent or ordinary health care, and getting even a small pension too, can add up to a reasonably stable and secure lifestyle for a retiree.
I am a “big L” Libertarian so it pains me to say this but in order to switch to a Singapore style health care system, the U.S. would need to make HSAs mandatory like Singapore. I think the government has treated people like children for so long, people think the government will take care of them if they run out of money.
I do wonder how many Boomers will own their homes after 65. It was the source of wealth for the earlier generation. Even if your home isn’t worth much on the market, it was very valuable to the owner.
And as one ages, your live with the old decor, perhaps by choice for the memories, and neglect non-critical repairs as a way to extract the “income” from your “savings.” This can also help control the recurring property tax costs assuming your neighborhood doesn’t gentrify and there isn’t a elderly property tax abatement program.
The older people I’ve seen with the most trouble getting by are those who must also meet their rent every month.
Will older people in the near future, out of desperation, accept drastically different ways of living in order to cope with their poverty? I am thinking of rooming houses writ large, housing complexes of extremely minimalist amenities, with notional security and health surveillance. This would be a better future than many people currently face. I’m making the radical assumption that people won’t change their behavior and governments won’t fix their finances.
We might also want to project a bigger decline in life expectancy for a large chunk of the population, sadly.
We could require it like Singapore, but it really isn’t possible for a rich country as whole to save. All that is being saved is electronic credits against future income that determine how it will be divided up, no different from taxes.