Quote:
Originally Posted by Sly
This whole possibility should actually be a kick in the ass for most people, making them realize that depending on SS for retirement is a terrible idea, but I doubt many will see that.
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In theory you are correct. But there is a large group of people in the baby boomer generation who were never offered any kind of 401K or retirement through their job. Sure, they could have gone out and gotten their own IRA, but the reality is that Capitalism is a pyramid. The further down it you go the less those jobs pay and those people don't really have the means to set aside their own IRA.
The average wage in America is $16 per hour. At that wage you make around $30K per year pre tax. After all the taxes you will likely see around $23K per year. The average home price in the US is $180K.
So if the average wage earner buys the average home that will take up half of their take home pay. Add in a car (nothing fancy, just a car) food, utilities etc and the average wage earner is lucky to make ends meet.
Say that average person took 3% of their income and set it aside every year for their own retirement. Assuming they did this at age 20 and did it for 40 years at 2% interest (that is more than most savings/money market accounts offer) they would end up with about $45K in the bank. . . not much of a retirement. Say they were able to set aside 10% and invested it to get a 6% return annually and they never lost (meaning recessions like the one we have now never happen) that would give them about $440K. That is a whole hell of a lot better, but it would require that a lot of things went right for that person and that they were able to set aside 10% of their income.
I'm not making excuses for people, I'm just pointing out that there are a lot of people for whom this is reality and fixing that reality is a little more challenging than just saying so.