Sure and obviously this is just a bit of polemic over in The Guardian but we should still challenge such obvious drivel. We’re told that 42% of Americans are at risk of retiring broke. You know, no cash, no savings, no income, they’ll be shopping in the cat food aisle for their meaty proteins.
This is of course the most entire colei*. For we have a savings system built to ensure that Americans aren’t broke in their Golden Years. For even in that den of capitalist iniquity, the home of Uncle Sam, we do still have a welfare state. The specific part of which catering to Grandma’s years between having the time to go to flower arranging classes and forgetting of their existence is Social Security.
This therefore is simply nonsense:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]We live in what feels like permanently lean times. Forty-two per cent of American adults are at risk of retiring broke,[/perfectpullquote]
If we go and check the reference supplied we get this:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] At this rate, retirement is more of a fantasy than a reality for many people in this country. About 42 percent of Americans have less than $10,000 saved for when they retire, according to a study by GoBankingRates. [/perfectpullquote]
That’s also the purest colei*. Sure and it’s true that not all Americans do indeed maximise their SS pension but most of those who work as wage slaves their entire working lives will get close. And that produces a certain pension, a certain value we can say is their savings:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Accordingly, given an average Social Security retirement benefit of $1,294/month (in 2014), a 10-year Treasury rate hovering somewhere around 2% (at the time of this writing), assumed inflation of 3%, and a life expectancy (according to Social Security’s own 2010 Period Life Table) for someone who’s already reached age 66 (full retirement age for today’s retirees) of approximately 17 years for a male and 20 years for a female, the average “lump sum” value of Social Security is about $280,000 for males and $335,000 for females. At a maximum Social Security benefit of $2,642/month (for those who maxxed out the Social Security wage base for 35 years), the value of Social Security amounts to about $572,000 for men and $683,000 for women![/perfectpullquote]
People have an average of between a quarter and half a million socked away for their retirement. Now, this may not be enough, maybe they should have more. Maybe it’s not even a very good deal – you can certainly construct models in which for people currently paying in it’s a money loser over time.
But then government running something that’s a money loser for the people who have to pay for it is not unusual, is it?
We might even say that a good reason why working stiffs don’t have enough money is that Uncle Sam takes 12% of their incomes (yes, the employers’ part is incident upon wages) in forcible savings for their retirement.
No, we cannot say ah, but that’s different. Because it always is true that the suggested solution to these woes is that government does more. Thus, in order to avoid committing Worstall’s Fallacy we must consider the effects of what government is already doing. That is, any consideration of American retirement savings must include the value and income from Social Security. Anything that doesn’t is just bollocks**.