Will Hordes Of Poor Seniors Overwhelm Government Welfare Programs?

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The editors of Bloomberg recently published a series of editorials on America’s impending “retirement crisis”, in which they emphasis “Under reasonable estimates … could take a toll on state budgets across the country” as poor senior citizens rely on government handouts to survive. Scary stuff, if true. In fact, the assumptions driving these sinister claims are anything but reasonable. And estimates from nonpartisan government agencies tell an almost opposite story: Poverty in old age is falling, not rising, as America’s seniors get richer.

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Seemingly everyone believes that Americans are saving dramatically less for retirement. Very few employees are participating in 401(k)s; If they participate, they do not contribute enough; And once they retire, Americans lack the financial skills to manage their savings at retirement that can last for decades.

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But what happens if the critics are taken for granted? The answer, according to Bloomberg, is that government welfare programs will bear the burden. Supplemental Security Income (SSI) provides cash payments to poor elderly; Medicaid provides health coverage; The Supplemental Nutrition Assistance Plan (SNAP) provides a “food stamp”; Household energy subsidies help with heat and electricity; and other programs vary at the discretion of the state or local government. If the retirement crisis strikes, poor retirees may have to spend a lot of money to the government.

and AAR . This would be Bloomberg’s claim based on
a R
p-commission Study, “The Retiring Poor in New Jersey: Estimated Spending on Government Programs for Older Adults.” The study suggests that the annual cost of welfare benefits for New Jersey seniors will increase from $404 million in 2016 to between $7.2 and $10.5. One billion In 2030, Americans’ less preparedness for retirement resulted in a 17-fold increase in costs.

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But, as is the case with many, Several Media stories detailing our impending “retirement crisis”, these conclusions fall apart after viewing the details. The New Jersey study begins with household income and wealth data for the year 2008, drawn from the Income and Program Participation Survey (SIPP). The study estimates future Social Security benefits from household income and estimates from household savings that retirees may have fewer assets in old age. Together, Social Security and asset income are considered to make up the total income in retirement.

All of this sounds reasonable, but a close watcher can tell there’s a problem from the start: Wellness costs for New Jersey seniors are slowly rising from a real value of $404 million in 2016 to $7 billion or more in 2030. does not become more. Rather, the actual 2016 values ​​before the study were . till Estimate Price for 2020, welfare costs increased from $404 million to $2.2 billion, a more than five-fold increase in just four years. The obvious explanation for that increase is that the study’s model underestimates retirees’ incomes and therefore underestimates costs for means-tested welfare programs.

All I can suggest is where those problems may arise. First, the AARP study estimates Social Security benefits based on survey respondents’ current income. If their income continues to rise, which is likely, their Social Security benefit will be even higher.

Second, the study ignores income derived from traditional “defined benefit” pensions. Many private sector workers are not earning new benefits under traditional pensions, but a significant number have done so in the past and can expect some benefits in retirement. In addition, almost all government employees have a traditional pension. According to the Public Plans Database, more than 339,000 New Jersey residents received public sector pensions in 2020, with an average annual benefit of $33,000. That’s a lot of money to take out of the study’s estimates.

And third, while the study assumes that household assets continue to earn 4 percent annual interest as measured in 2008, the study assumes no additional retirement savings are occurring after 2008. A person 65 years old in 2035 will be only 38 in 2008, with the bulk of their savings years yet to come.

In short, Bloomberg bases its conclusion that “America’s retirement crisis is also a financial crisis” that underestimates Social Security benefits, waives generous public employee pensions, and assumes that the family was in the year 2008. Don’t save anything for post-retirement. In my opinion, these limitations make the study’s findings essentially meaningless.

However, two non-partisan government agencies have speculated that could help. The Social Security Administration’s Office of Policy uses a sophisticated microsimulation model to present the income of future retirees in detail. The SSA estimates that in 2022 about five percent of Americans 65 and older had an income below the poverty threshold. But by 2050, the SSA projects, only four percent of retirees will be below the poverty line. Similarly, the SSA records that in 2022, 3.9 percent of senior citizens were eligible for Supplemental Security Income (SSI) benefits, a means-tested program for the poor. SSA projects, however, that by 2045 only 3.3 percent of senior citizens’ incomes and assets will be low enough to qualify for SSI. Similarly, the Congressional Budget Office projects eligibility for the Medicaid Aged Program, which provides health coverage to low-income senior citizens. From 2020 to 2031, the CBO projects that the share of the over-65s population covered by Medicare will drop from 12.8 percent to just 9.7 percent.

All this is part of a long-term trend of rising retirement income and declining poverty in old age. It is regrettable that a very reliable publication like Bloomberg treats rising old-age poverty as a fact when the best non-biased estimates tell us the exact opposite. Americans’ retirement security is so important that the facts may be treated so casually.

Credit: www.forbes.com /

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