Clinton vs Trump: Here’s why they won’t talk about retirement or Social Security
There's a preventable crisis facing America, and yet neither of the major-party candidates has said much, if anything, about it. To that point, the words "retirement" and "Social Security" have not been uttered in the first two presidential debates.
Let's see what happens in the final debate on Wednesday night.
The fast-approaching retirement crisis, and the fact that a majority of Americans don't have nearly enough money saved for the future, should be discussed by Hillary Clinton and Donald Trump. This final debate should address what can be done about Social Security. What about Medicare? And what can be done about the retirement savings shortfall?
A little background: According to the Social Security Administration, there are roughly 45 million retirees in America, and some 10,000 people over the age of 62 leave the workforce every single day. Figuring lifespans and attrition, at this rate, there will be more than 72 million retired Americans by 2030.
And the vast majority of these people won't have nearly enough money to support themselves through retirement.
According to a June 2016 study conducted by Vanguard, the average 401(k) plan balance is just $96,000, which is actually down from 2014, when it was roughly $102,000. Couple this with the Social Security insolvency predicted to occur, perhaps as early as 2032 or 2033, and it becomes obvious that some serious changes are needed to avoid disaster.
Of course, these things didn't seem all that frightening a few decades ago. People were having more children (i.e., future taxpayers), and lifespans were significantly shorter. But much has changed since the 1960s.
First, the cost of living has skyrocketed. This is true across the board, but it's especially true for health-care costs, which can consume as much as 40 percent (or more) of a retiree's budget. According to a January 2013 study published in AARP magazine, even with Medicare (more on this in a moment), a healthy 65-year old couple can expect to spend $245,000 on health care over the duration of their retirement.
This savings shortfall is made more acute because people are living much, much longer than only a few decades ago. The average American lifespan is now just under 80 for a woman, and about 75 years long for a man. Additionally, a healthy 65-year-old woman has a 25 percent chance to live to be 95, while a healthy 65-year old man has roughly the same odds of living to be 89.
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And yet, this savings shortfall isn't someone else's problem, because it won't just impact those moving into retirement. Simply, we are all going to have to care for this massive number of aging people who clearly aren't going to have the resources to care for themselves.
Enter the government and this year's presidential election. With those sobering statistics in mind, I want to discuss key topics that I would like to see addressed during Sunday night's debate.
Will either candidate put forward a plan to shore up Social Security? There are several ways to address the issue, such as increasing the retirement age, reducing benefits, reducing benefits for wealthy retirees and increasing payroll taxes on the current workforce, but none of these is going to garner either candidate any additional votes, so I'd be surprised to see it addressed.
Think about the state of Social Security, then consider that Medicare is every bit as problematic. In fact, according to the Henry J. Kaiser Family Foundation, the only government expenditures larger than Medicare, which eats up roughly 15 percent of the total federal budget, are Social Security and national defense.
Retirees need health care, but costs are skyrocketing, there are more retirees than ever, and we are living longer than ever before. But how do we fix it?
Should retirees have to share a larger burden of their health-care costs, or should the majority of the revenue come through payroll taxes? And what about the report of rampant fraud impacting the system?
My guess is that Medicare will not be discussed in this final debate.
Pre-retirees don't have enough money saved, but what, if anything, can be done to increase their nest eggs? There have been a number of ideas tossed around over the years, such as increasing IRA contributions to match those allowed for 401(k) plans (I'm a big fan of this), mandating that employers automatically enroll workers in retirement plans (some states have begun to do this) or offering even greater tax incentives for those who save. But given that roughly one-third of Americans have saved absolutely nothing for retirement, clearly this topic may be the most difficult of all to solve.
Given that we are living longer, healthier lives, it may be wise for most of us to either delay retirement, or continue to work at least part-time. What can the government do about it? Reset expectations, for one thing.
The "gig economy" may not be ideal for younger workers who are looking to save, but many people over the age of 65 stay involved and earn money by working part-time, consulting or freelancing. I'd love to hear Sunday's debate moderator ask if there are tax incentives that could be put in place to encourage people to continue to work.
We tend to see debates as beauty contests, favorably scoring the best quips or "gotcha" moments. But debates are an opportunity for us to hear ideas straight from the candidates' mouths, without any spin or filter.
There are, obviously, numerous issues that need to be addressed, but the preceding four are the questions I'd love to see asked, and, even more importantly, see answered in an intelligent way.
— By Scott Hanson, co-CEO of Hanson McClain Advisors
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