A generation ago, middle-class families were able to put away enough money during their working years to make it through their later years with dignity. On average, they saved about 11 percent of their take-home pay while working. Many paid off their homes, got rid of all their debts and retired with strong pensions from their employers. And where pensions, savings and investments fell short, they could rely on Social Security to make up the difference.
That was the story a generation ago, but since that time, the retirement landscape has shifted dramatically against our families.
Among working families on the verge of retirement, about a third have no retirement savings of any kind, and another third have total savings that are less than their annual income. Many seniors have seen their housing wealth shrink, as well. According to AARP, in 2012, one out of every seven older homeowners was paying down a mortgage that was higher than the value of their house.
And just as they need to rely more than ever on employer support, employers are withdrawing from their traditional role in helping provide a secure retirement. Two decades ago, more than a third of all private-sector workers — 35 percent — had traditional, defined benefit pensions — pensions that guaranteed a certain monthly payment that retirees knew they could depend on. Today, only 18 percent of private-sector workers have defined benefit pensions. Employers have replaced guaranteed retirement income with savings plans, like 401(k) plans, that leave the retiree at the mercy of the market, and, sometimes, at the mercy of dubious investment products. These plans often fall short of what retirees need, and nearly half of all American workers don’t even have access to those limited plans. This leaves more than 44 million workers without access to a workplace retirement savings plan.
Add all of this up — the dramatic decline in individual savings and the dramatic decline of guaranteed retirement benefits and employer support in return for a lifetime of work — and we’re left with a retirement crisis — a crisis that is as real and as frightening as any policy problem facing the United States today.
With less savings and weaker private retirement protection, retirees depend more than ever on the safety and reliability of Social Security. Social Security works — no one runs out of benefits, and the guaranteed payments don’t rise and fall with the stock market. Two-thirds of seniors rely on it for the majority of their income in retirement, and for 14 million seniors, this is the safety net that keeps them out of poverty. Social Security also protects retirees’ spouses and children, disabled workers and family members who survive the death of the family’s earner. Here in Essex County alone, 139,280 people receive Social Security benefits.
And at the very time seniors most need to rely on Social Security, it has come under attack. Monthly payments are modest, averaging about $1,250, and over time, the benefits are shrinking in value. This puts a terrible squeeze on our seniors.
Social Security is rapidly becoming the only lifeline that millions of seniors have to keep their heads above water. And, yet, instead of taking on the retirement crisis, instead of strengthening Social Security, some in Washington are actually fighting to cut benefits.
The fact is that today, Social Security has a $2.7 trillion surplus. If we do nothing, Social Security will be safe for the next 20 years and even after that will continue to pay most benefits. With some modest adjustments, we can keep the system solvent for many more years — and could even increase benefits.
If we want a real middle class — a middle class that continues to serve as the backbone of our country — then we must take the retirement crisis seriously. Seniors have worked their entire lives and have paid into the system, but right now, more people than ever are on the edge of financial disaster once they retire — and the numbers continue to get worse. That is why we should be talking about expanding Social Security benefits — not cutting them.
The decisions we make about Social Security benefits are not just about math. At their core, these decisions are about our values. I believe we must honor our promises, make good on a system that millions of people paid into faithfully throughout their working years, and support the right of every person to retire with dignity — and that means protecting and expanding Social Security.
Elizabeth Warren is the senior U.S. senator for Massachusetts.