American Retirement in Danger

As of last year, someone with $1 million in the bank had a shot at a good retirement financially. Inflation was low. Stocks rose most quarters. A million dollars might yield $50,000 a year. Social Security could help boost that. Inflation and the market collapse have ruined this equation. Millions of older Americans need to recalculate the math for their retirements.

The list of problems only contains a few big ones. People preparing for retirement could place money in bonds with 3% yields. These would match the 2% inflation rate. In turn, the cost of living would not erode spending power. Inflation has jumped above 8%, according to recent consumer price index data. People cannot find safe fixed-income vehicles to match that or even close.

Stock prices paint a worse picture. A portfolio of $500,000 in 2021 may be down to $400,000 today. And market conditions could press that number lower. Withdrawals from equity balances have recently become risky.

What alternatives does this leave older Americans? In many cases, very few. People who have left their longtime jobs or plan to may be unable to return. New jobs may be limited to low-paid employment at Home Depot, Walmart or McDonald’s, where $20 an hour is a pay bonanza.

A sea of 60-year-olds and 70-year-olds seeking employment has a cascade effect. Often, as these people left the labor force, their jobs would go to younger workers. That trend has started to reverse itself quickly. The natural turnover of the aged end of the job market has started to disappear.

When retirement no longer works financially, people may need to stay employed another decade. Their lives change radically, at least according to their previous plans. Retirement for older Americans is not what it used to be just a year ago.

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