Frightening: Wealth Gap Widening Into Retirement
The poor and middle class continue to struggle while the wealthy get wealthier. We see it all around us.
Working a traditional job with a 401(k) just isn’t cutting it.
Even when you do the “right” things like you were told, such as finish school, go to college, get a “good” job with benefits and a retirement plan, you still end up behind the 8-ball, always seeming to have to play catch-up.
Even into so-called retirement, the wealth gap is widening frighteningly wider and wider. A recent article talked about this widening wealth gap:
William Kistler views retirement like someone tied to the tracks and watching a train coming. It’s looming and threatening, but there’s little he can do.
Kistler, a 63-year-old resident of Golden, Colorado, has been unable to build up a nest egg for himself and his wife with his modest salary at a nonprofit. He has saved little in a 401(k) over the past decade, after spending most of his working life self-employed. That puts him far behind many wealthier Americans approaching retirement.
“There is not enough to retire with,” he said. “It’s completely frightening, to tell you the truth. And I, like a lot of people, try not to think about it too much, which is actually a problem.”
With traditional pensions becoming rarer in the private sector, and lower-paid workers less likely to have access to an employer-provided retirement plan, there is a growing gulf in the retirement savings of the wealthy and people with lower incomes. That, experts say, could exacerbate an already widening wealth gap across America, as more than 70 million baby boomers head into retirement — many of them with skimpy reserves.
Because retirement savings are ever more closely tied to income, the widening gulf between the rich and those with less promises to continue — and perhaps worsen — after workers reach retirement age. That is likely to put pressure on government services and lead even more Americans to work well into what is supposed to be their golden years.
Increasingly, financial security for retirees reflects how much they have accumulated during their working career — things like 401(k) accounts, other savings and home equity.
Highly educated, dual income couples tend to do better under this system. The future looks bleaker for people with less education, lower incomes or health issues, as well as for single parents, said Karen Smith, a senior fellow at the Urban Institute, a Washington think tank.
“We do find rising inequality,” said Smith, who added that it’s a problem if those at the top are seeing disproportionate gains from economic growth.
Incomes for the highest-earning 1 percent of Americans soared 31 percent from 2009 through 2012, after adjusting for inflation, according to data compiled by Emmanuel Saez, an economist at University of California, Berkeley. For everyone else, it inched up an average of 0.4 percent.
Researchers at the liberal Economic Policy Institute say households in the top fifth of income saw median retirement savings increase from $45,539 in 1989 to $160,000 in 2010 in inflation-adjusted dollars. For households in the bottom fifth, median retirement savings were down from $8,433 in 1989 to $8,000 in 2010, adjusted for inflation. The calculations did not include households without retirement savings.
Employment Benefit Research Institute research director Jack VanDerhei found that in households where annual income is less than $25,000, nine in 10 saved less than $10,000, up slightly from 2009. For households with six-figure incomes, 42 percent saved at least $250,000, up from 34 percent five years earlier.
This wealth gap is only going to continue to get worse. You hear it all the time. You or someone you know works all their lives only to run into a brick wall when they “retire”.
The money runs out, or they never were able to build any savings to speak of to begin with. Prices for everything goes up along with taxes.
The article above stated: “Incomes for the highest-earning 1 percent of Americans soared 31 percent from 2009 through 2012, after adjusting for inflation, according to data compiled by Emmanuel Saez, an economist at University of California, Berkeley. For everyone else, it inched up an average of 0.4 percent.” (Emphasis mine)
Does this sound like a good plan to you? Always trading your time for money? It doesn’t work.
And the wealthy don’t live that way. They do different things than regular folks and you should do the same.
Mike J Anthony