Keeping Up With The Joneses

Writing in the Washington Post, Martha Hamilton has some really good numbers regarding retirement. In her article, Low-Paid Means At Risk in Retirement, Hamilton says:

“Not everyone in the golden age of retirement is raking in the gold: In 2006, half of all Americans age 65 and older had annual incomes of less than $16,890, according to the Congressional Research Service. A quarter of all retirees depend on Social Security for 100 percent of their income.”

“Guess which workers most often choose not to put aside money for retirement,” asks Hamilton. “Lower-income workers often struggle just to meet the mortgage or pay the rent. Even if they do have money to save, the incentives are not as enticing for them as for higher-income workers, said Christian E. Weller, senior economist at the Center for American Progress. Because 401(k) plans reduce taxable income, a worker in top tax bracket gets 35 cents for every dollar saved. A lower-paid worker with a marginal tax rate of 10 percent gets 10 cents.

Hamilton reports that in 2001, “only 13.7 percent of workers who earned $20,000 or less participated in 401(k) plans, compared with 67.1 percent of workers who earned more than $100,000, according to an analysis by Munnell and Annika Sunden, authors of “Coming Up Short: The Challenge of 401(k) Plans,” published by Brookings Institution Press.”

Interestingly, Hamilton says poverty among seniors is actually declining.

“Although changes need to be made to Social Security, it’s important to recognize how it has succeeded in reducing poverty among the elderly. One in three people age 65 and older was in poverty in 1960, according to the Congressional Research Service. Today, it’s less than one in 10. Social Security replaces a higher percentage of lower earning workers’ incomes than it does for higher-paid workers, which is one of its strengths.”

The points made by Hamilton suggest that for many of those aged 62 and older a reverse mortgage could be an important source of additional cash. It would be better if this were not the case, if retirees had sufficient income and assets to support themselves without creating additional debt, but it’s better to have real estate equity than not.

For the complete article, which is both important and terrific, press here.

This entry was posted on Wednesday, October 31st, 2007 at 2:14 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.