Who Will Do Something About the Looming Retirement Crisis?

In Douglas Coupland's 1991 age-warfare classic novel "Generation X" a young man trashes a car because it bears a bumpersticker with the obnoxious slogan "I'm spending my children's inheritance." Like Coupland I launched my career as something like a spokesperson for Generation X, raging on behalf of a demographic cohort perpetually struggling to make itself and its concerns heard in the wake of the older, bigger and wealthier Baby Boom generation. Culturally marginalized by the Boomers, forced to accept transient employment, hobbled by growing student loan debt and buffeted by recessions, Xers feared that they would never be able to save enough in order to retire, much less spend their kids' inheritance.

*The retirement crisis will be worse than we ever feared.

"We predict the U.S. will soon be facing rates of elder poverty unseen since the Great Depression," New School economist Teresa Ghilarducci and Blackstone executive vice chairman Tony James write in the Harvard Business Review.

• Sayonara, Kurt Cobain. Born in 1961, the oldest Xers are graying, aching, 57. And in trouble. A New School study projects that 40% of workers ages 50-60 and their spouses who are not poor or near poor will fall into poverty.

Retirement specialists from the political left and right concur: big segments of whole generations of the elderly will soon be impoverished, some homeless or even starving. After the Xers, the Millennial deluge; old age looks even bleaker for today's young adults.

Experts vary on how much you should have saved by the time you retire. Fidelity advises a $75,000-a-year worker who retires at age 67 to squirrel away at least $600,000 in present-day dollars. Following the traditional rule of having 80% of your salary for 20 years pushes that desired minimum to $1.2 million.

The problem is, the average savings of 55- to 64-year-olds is a piddling $104,000. According to a 2015 study of people 55 and older by the General Accounting Office, 29% have nothing whatsover.

It's a joke, but it's not funny. Yet neither political party has much to say about the looming retirement crisis.

The rapidity and scale of downward mobility among the elderly will shock American society, precipitating political upheavals as dramatic as those we saw during the 1930s. Political and business leaders are in denial about this issue. But the desperation of our grandparents and parents -- not to mention the children charged with caring for them since they won't be able to provide for themselves -- will make voters vulnerable to demagoguery of all stripes. Instability will be rampant. Democracy could be in danger.

It isn't hard to see how we got here.

Old-fashioned defined-benefit pension plans have been replaced by defined-contribution benefit plans like IRAs and 401s which are problematic for many workers. People don't contribute enough. Employers pitch in less than they did to pensions, or nothing at all. When workers suffer a setback like a job loss, they borrow against their accounts. They make poor investment decisions. When the stock market suffers a downturn, accounts lose value. High administrative costs suck away returns. The average 401 has never been bigger -- but still, we're talking total savings of $104,000.

Try living on that for 20 or 30 years.

Baby Boomers enjoyed the last vestige of an economy where you might hold one or two jobs throughout your most of your working career. They grew up in two-parent households and enjoyed the fruits of the postwar boom.

By contrast, many Generation Xers and younger Millennials have divorced parents, which reduced their financial security. Gen Xers got slammed by the 1987 stock market crash as well as the 2000 dot-com collapse; both Xers and Millennials lost jobs and savings during the 2008-09 Great Recession. They work in the gig economy. Younger workers might not have to drive for Uber or rent out a room on Airbnb but their work lives are highly mobile and frequently disrupted. They get laid off and outsourced. They must go back to school or move to adjust to employers' demands. Their real and net incomes are significantly lower than the Boomers' and their savings rate reflects that.

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