Surprise! Expanding Social Security And Medicare Can Help Older Workers
Older working Americans have had a rough year. Over 3 million have lost their jobs in the COVID-19 recession and given employers reluctance to rehire older workers in general, they will likely stay jobless for months or drop out of the labor market.
Many older workers won’t be able to work longer. They are already being pushed out to a too-early retirement. 60% of older workers leaving the labor force in April say they were retired, up from 53% pre-pandemic. Older workers still at work find themselves in workplaces without adequate safety standards according to the National Academy and at risk of death or permanent disability if exposed to SARS-COV-2. My colleague Siavash Radpour and I, with heavy lift from my research team at The New School found that both jobless older workers and employed older workers have one thing in common: they can’t afford to retire.
Retirement Savings Are Inadequate
For the typical older worker, household retirement savings fall far short. Do-it-yourself accounts — 401(k)s and individual retirement accounts have become the dominant retirement savings vehicles outside of Social Security for most workers. Even 15% of high-income workers nearing retirement earning $115,000 plus per year and 20% of middle class and 50% of lower income older workers have no retirement savings and will rely only on Social Security.
The median working household aged 55-64 has a retirement savings of $43,000. This can provide the household with an income of only $200 per month in retirement when they retire at age 65.
Here is an example of an average American household which made about $70,000 per year before retirement, and took approximately $48,000 home after taxes and retirement savings. That household must now cut their spending to $37,000 a year in retirement to avoid running out of money.
In the best-case scenario, cutting spending by 25% means a significant drop in living standards of a household. But the situation is even worse for those who are still paying mortgages – and more elders have mortgages than ever before — or have medical expenses that eat a large portion of their income. As a result of these expenses, they lose an even larger portion of their income available for day to day expenses.
The situation is even worse for the low earners. The median retirement savings for working households ages 55-64 in the bottom half of earnings distribution is only $3,000. These people have nothing more than their Social Security benefits to rely on in retirement. After many years of hard work, many low earners will spend their retirement in poverty. Additionally, the system makes gender and racial disparities worse. Women are 80% more likely to be impoverished at age 65 or older and only 41% of Black families and 35% of Hispanic families had retirement account savings in 2016.
Recession Exposes Flaws In American Retirement System
A recession is a good time to admit the American retirement system doesn’t work. We have the highest elder extreme poverty rates among rich nations, estimates are 20%.
It is not surprising that many older workers want to work longer and postpone retirement. Unfortunately, that was never a viable option for many older workers. The age at which workers can get Full Social Security Benefits increased from 65 to 67 over the last two decades, but very few people work past age 68 and being able to work or find employment at old ages is difficult.
While those with advanced degrees, high incomes, and good health postpone their retirement and stay in the labor force, low earners often find themselves in poor health and unable to work or are discriminated against by employers. The COVID-19 pandemic and recession made the situation even worse for older workers. Employers now perceive older workers to be even more risky and expensive. As a result of the negative perception of older workers, the unemployment rate for workers has significantly exceeded the unemployment rate of those 35 to 54 for the first time, and older workers are experiencing a slower recovery.
Right now, we should prioritize taking care of those who are affected by the COVID-19 pandemic and recession while trying to keep everyone healthy and safe until we overcome the virus. Workers, especially older workers and others who are more vulnerable, should not have to choose between financial devastation and putting themselves at risk by working at unsafe environments without proper protective measures.
Congress Needs To Act Now
Congress needs to expand Social Security to help pushed out older workers stay out of poverty in retirement.
Congress can help older workers by lowering the Medicare eligibility age to 50 and, this is crucial, making Medicare single payer. Not only will Medicare coverage provide unemployed older workers with health insurance at a time they need it most, but also it will reduce the cost of hiring older workers, encouraging employers to hire them.
Congress needs to strengthen our anti-age discrimination regulations and enforcement to make sure older workers can find employment when they are ready to go back to work. Congress needs to restore the extra $600 supplemental unemployment benefits and institute new stimulus checks. Also they must expand EITC to those over 65 and raise the minimum wage so low wage employers are not the chief beneficiary.
The COVID-19 pandemic and recession has exposed the weaknesses of our broken retirement system even more than before. We need to fundamentally address these issues to make sure older workers have a secure retirement in good times or bad times, whether they experience personal hardships or a global disaster such as the kind we are facing now.