Welcome to America
There’s an interesting story floating around about one of the US Navy Seals who killed bin Laden leaving the military after 16 years and getting no benefits. No health insurance, no pension.
Why? Because, among other reasons, he left the military before being in 20 years.
The other reason is because he lives in America.
While at first the story sounds shocking – on greater reflection, it’s not. Adam Serwer makes a great point:
I didn’t kill bin Laden, and no one’s giving me insurance or a pension either
I know far too many people who have to go out and get their own health insurance, without a subsidy from an employer, and when it comes time to retire, they’ve got no pension either. When retirement time comes, a lot of us aren’t going to be able to pay to live.
And that’s why the current debate over cutting benefits on Social Security and Medicare is so ghastly. Most of the rich boys and girls in the US House and the US Senate don’t have to worry about what happens to them and their families when they retire. They’ll have ample benefits from their previous job(s), and they’ll also probably be somewhat rich by then if they’re not already.
For the rest of us, not so much.
I work for myself. I pay all my own health insurance, with no employer subsidy, and the only pension I’ll get when I retire is whatever money I can sock away now in an IRA. No one is going to be giving me X% of my annual income when I retire. So while I feel for the retired service member who killed bin Laden, what’s happening to him and his family is pretty much par for the course in America today. It’s simply the way the system works. And our government refuses to do anything serious to change it.
Health care reform helped a little, but not nearly enough
Yes, we had health care reform, and that helped, to a degree. But Obamacare doesn’t do nearly enough to rein in the exorbitant, absurd, costs charged by insurance companies, doctors, hospitals, pharmaceutical companies, which leads to a huge never-ending spiraling of prices which hit hardest against those Americans who don’t have subsidized insurance, and who don’t have pensions (since we have to pay the same price as everyone who has good insurance, and actually we usually pay more than them because of insurance companies’ cute little “non-allowed” trick).
What’s important to realize, and I think this gets lost far too much when we’re debating Medicare and Social Security, is that these programs aren’t just for the working poor. Some day soon, far too many of us are going to be the un-working poor when we retire and suddenly realize we don’t have the same corporate-sponsored retirement package that many of our parents had. I have no idea what I’m going to do when I retire, if I even ever am able to retire. I’ve been trying to sock away as much as I can into my retirement, but it’s hard to find the extra money to put aside in the first place, especially these days. And my retirement savings, meager as they are, are probably relatively good compared to that of most Americas.
Do you have 20x your annual salary in savings?
There was a chilling article in the NYT a few months ago, that noted that 75% of Americans nearing retirement age in 2010 have less than $30,000 in their retirement account.
Guess how long $30,000 is going to last. A year, if you’re lucky? Maybe two if you have a spouse and they have the same amount in their retirement account, and you live in a part of the country that isn’t as expensive, and you don’t still owe an expensive mortgage.
The article contained an even more shocking fact:
To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. If you have an income-producing partner and a paid-off house, you need less. This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.
Who has 20x their annual income in savings and equity in their home?
I don’t (though my annual income plummeted in 2009, thanks to the economy tanking, but I doubt that really “helps” the calculation). So, let’s say you make $50,000 a year. That means you need $1 million in financial wealth when you retire, beyond Social Security. Most people nearing retirement age have $30,000 in their retirement account. Maybe you got lucky with your home and made some money on it – but did you really make $970,000 on your home, to get you to the $1 million you need? Doubtful. Not to mention, you still have to live somewhere, so even if you have any decent equity in your home, you’d have to sell your home, and buy another lesser home, in order to use any of the home equity to finance your retirement.
A lot of us won’t get benefits nearly as good as our parents got (if they got any)
When Congress and the White House talk of finding ways to cut back on Social Security and Medicare, I think a lot of people, certainly people under the age of 50, think that this doesn’t really apply to them, if only because they don’t believe that Social Security is going to be around for them when they retire anyway. (UPDATE: To its credit, the White House has just taken raising the Medicare eligibility age off the table.)
But what I think a lot of people are missing, or not yet facing, is that we are not our parents’, or grand-parents’ (if you’re under 40), generation. Far fewer of us, as compared to our parents, are going to retire with the cushy 80%-salary pension plan, and the cushy health insurance benefits until death (that even include dental and vision! — I don’t get either with my off-the-shelf insurance). A lot of us, dare I say most of us, are going to be on our own, trying to figure out how to pay absurdly high health insurance costs in order to pay for absurdly high health care costs, while still paying our mortgage, still paying our student loans, still trying to eat.
It’s a nasty future. And one that far too few people in Washington are talking about, and far too few people outside of Washington fully comprehend is coming their way, far sooner than they realize.