The Great Retirement Savings Flimflam

Can you ever retire if you didn’t start saving 40 years ago?

Photo by Towfiqu barbhuiya on Unsplash

I have been bothered by this whole notion of retirement savings for some time. I strongly suspect it is not mathematically possible for most of us to save enough for a comfortable retirement. But what finally set me off like a blowtorch in a fireworks factory was one line from an article about retirement savings, which read:

According to Fidelity Investments, by the age of 67, people should have 10 times their salary saved for retirement.

What planet are these people living on?

A reliable source in the financial planning industry assures me that yes, it is mathematically possible to save enough for retirement, if (1) you start when you’re in your 20s and don’t stop and (2) if you’re already making a top-dollar income (which presumably, allows you to stash some of it away).

But this does not apply to those of us living on average, slightly above average, or below-average incomes. For most of us, such an ambitious savings goal is fantasyland. I should know. I was a dedicated saver in the earliest stage of my career. Even on a weekly take-home pay of $110, I squirreled $20 a week into savings. Of course, I lived a spartan lifestyle in those days and my needs were minimal – rent, groceries, gas, and an occasional concert ticket.

The Law of Household Necessity

But those days ended as soon as I married. They say two can live as cheaply as one, but not when one of them aspires to more than a spartan lifestyle. I soon discovered the axiom that I call “Akchin’s Law of Household Necessity, which states necessary expenses always rise to meet or exceed available income. When they meet, no savings. When they exceed, there are credit cards. I offer as proof of this axiom the fact that Americans’ credit card debt reached a record $1.129 trillion at the end of last year.

The effect on savings is also clear. The Survey of Consumer Finances by the Federal Reserve reported that in 2022, almost half of American households had exactly zero saved for retirement. (Even among those aged 59 and older, 30% still had nothing saved for retirement.) Only 9% had saved more than $500,000.

All of which has led me to conclude that the whole notion of saving for retirement is a big hoax, designed to make us feel inadequate for not achieving impossible goals and guilty for being unwilling to endure 40 years of deferred gratification in order to be financially secure in our old age.

This week I discovered someone else in my corner. Teresa Ghilarducci, a labor economist and professor at The New School for Social Research, says only 10% of Americans ages 62 to 70 are both retired and financially stable, according to her research. The rest are either retired and living below their former standard of living, or still working because they can’t afford to stop.

Ghilarducci’s new book, Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy, argues that the current U.S. retirement system – such as it is – leaves out lower- and middle-income Americans, or 90% of the country. Urging people to work longer, the most popular policy proposal,  is a “fake solution,” she says. Her book argues that the nation needs a “Gray New Deal,” a bold initiative that will guarantee that older adults can maintain their living standards in retirement.

Science Fiction

So as you scan ads from brokers and advisors telling you about saving and investing for retirement, and your income puts you in the bottom 90% - in 2023, less than $216,000 annually – just ignore them. They are not talking to you. As far as you’re concerned, their projections are science fiction.

You can also stop dreaming of the retirement fantasy I call the pina colada fever dream. That’s science fiction too. You don’t get to have that.

What you can look forward to is working longer, or taking part-time work in retirement, or lowering your standard of living, or moving to an inexpensive Third World country.

It would be great if you could amass a million-dollar cushion, but it ‘s probably a little late for that.

More realistically, here are other constructive activities I can suggest:

1.      Pray for the continued solvency of Social Security, which will require an act of Congress (if not an act of God). You can’t live well on Social Security alone (average benefit is $22,000 per year), but it’s great to have it as a foundation.

2.      Pray that the stock market defies gravity for the next 20 to 30 years, rather than a nosedive that takes your investments with it.

3.      Live within your means. The rule of thumb for living expenses in retirement is 70% of what they were when you worked. Today’s necessities may be tomorrow’s luxuries.

4.      Be exceedingly kind to your family members. They may be your caregivers and resources of last resort.

5.      Stop feeling guilty about not saving more. It’s not your fault. You needed the money to stay alive. Pay no attention to those men behind the curtain who want you to live in fear and regret.

Or, consider the possibility that you might have a perfectly lovely post-work life without needing a million bucks in the bank.