David Lerner Associates: Many U.S. Seniors Facing Severe Income Shortages
According to the data, seniors in Nevada and Hawaii are the only ones who have median incomes that meet or exceed the benchmark level of 70 percent of pre-retirement income that’s often recommended for retirees. The nationwide median household income of seniors is $35,107, or approximately 57 percent of the median income of Americans between the ages of 45 and 64.
A Comfortable Retirement?
Mike Sante, the managing editor of Interest.com, the website that analyzed and reported the data, stated, “We found that many senior citizens are significantly underfunded and risk running out of money. They certainly don't have enough for what we consider to be a safe and comfortable retirement.”
Seniors in Arizona (68.1 percent), New Mexico (66.9 percent) and Florida (66.9 percent) have median incomes that come close to the 70 percent benchmark. In contrast, seniors in Massachusetts (45 percent) are the furthest away from the benchmark. North Dakota, Rhode Island, New Jersey and New Hampshire were also at the bottom of the list with income replacement rates around 50 percent.
The analysis noted that even though the median income of seniors in Nevada meets the threshold, lower wages earned by younger workers pushed the replacement rate up, so Nevada seniors aren’t necessarily better off financially than seniors in other states. Hawaii, meanwhile, has a strong union culture, which has boosted many seniors’ income via monthly pension checks.
Elsewhere in the country, a growing number of seniors have lost the guarantee of a monthly pension benefit in retirement. Instead, many of their employers replaced defined-benefit pension plans, which provide a pre-determined and guaranteed monthly benefit amount, with defined contribution plans like 401(k)s. With these plans, employees are primarily responsible for saving and investing for their own retirement.
“The amount of money these seniors have to live on in retirement depends largely on how much they saved in their retirement account during their working years and how wisely they invested it,” says David Lerner Associates Branch Manager Jonathan Jarow. “Seniors who reach their desired retirement age without enough money to retire comfortably are faced with two main choices: keep working until they have saved more money, or adjust their retirement income and lifestyle expectations downward.”
The Big Unknown
Social Security remains a big unknown when it comes to the financial security of future retirees. According to the Social Security Administration, about half (53 percent) of current married retirees and three-quarters (74 percent) of current unmarried retirees derive at least half of their income from Social Security. For nearly a quarter of current married retirees and almost half of current unmarried retirees, Social Security accounts for at least 90 percent of their income.
The average monthly Social Security benefit check is about $1,230, which results in a total average annual Social Security income of $14,760 (or $29,520 for a married couple if both receive Social Security). So it’s not surprising that almost 20 million seniors — or nearly half of the elderly population in the U.S. — are living on incomes that are near the poverty line.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC