Inflation is Killing Retirees on Fixed Pensions

Inflation is Killing Retirees on Fixed Pensions.

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So did ultra-low savings interest rates.

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But Social Security is getting a 8+% boost.

That’ll help. But the real problem is the fact that many Americans don’t plan well for retirement. Among elderly Social Security beneficiaries, 12% of men and 15% of women rely on
Social Security for 90% or more of their income.

Yes SS is keeping up with inflation… Fixed Pensions are not…

Assume SS and Fixed Pension amounts are the same… (mine are close) essentially a 4% increase with 8% Inflation.

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It always bugs me when people on social security say they are on “fixed incomes”. Wage earners are on fixed incomes too (no raises for years, no COLAs like social security gets). Maybe a better term would be “limited income”, which applies to many seniors and many wage earners too…!!

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Not planning for retirement is true for some folks. But a number of workers have no access to a pension plan or 401k-type of plans. I remember my first 401k years ago. I left the company after 6 years (4 years in the plan, which they started in my 3rd year of employment). Since I wasn’t in the plan for 5 years (not vested), I lost all of the matching contributions plus interest.
I think the vesting rules may have gotten better, but many of these plans aren’t possible for people earning low wages.
So, it’s not that some folks didn’t plan, but that they don’t have the resources (money) to invest. For example, a woman working as a day care worker or nursing assistant for seniors doesn’t have the financial resources to plan for retirement that other positions have. Yet they are essential workers. And they are judged by others for “not planning for retirement”.

While the lowest-paying jobs will always exist, and some people, due to unfortunate circumstances beyond their control are forced to stay in that low wage-earning segment, many folks do not take advantage of opportunities to better themselves during their prime earning years of life.

In my opinion, most people choose not to make more money. Everyone is different and everyone has different skills to sell on the open market. Most people underestimate their own value and as a result underperform in their earnings capabilities. It’s often due to being too risk-averse and maybe a lack of confidence, but in hindsight most folks would have to admit they could have done better.

For those who do spend a lifetime working at the lowest income-producing jobs, it makes sense that they will occupy the same level in retirement.

That’s not to say we shouldn’t help them and sympathize with them or the people who were the undeserving victims of bad fortune. But, that’s how life plays out.

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Yes, I also hate the term “fixed income”. Another one I hate is “working families”. You would have to be in the top top of the richest people to not work at all.

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Yes the Fed was artificially manipulating interest rates. So then you have to adjust strategy to things that perform well under those conditions…which is NOT savings.

The Fed was responding to a global financial crisis. That crisis was brought about by private financial interests which were unable to fix the problems they themselves caused.

It was the only reasonable thing to do. The missing component was the US Government not holding those responsible accountable for their abuses of our monetary system.

The resulting period of low interest rates was perpetuated by the demands of the private sector becoming addicted to cheap money afforded them by the same Fed policy that bailed them out earlier.

Huh? Clarify?

I base that statement on what I’ve observed, what I’ve experienced and what I’ve read.

Most people in the US become complacent about halfway through their earning careers. They settle into a routine and top out in pay grade about that time and sit back and relax, satisfied that a lot more effort isn’t really worth it. They’d rather spend that time and energy in other, more enjoyable ways. Whether that decision is made consciously or not, it’s still a decision most people will make sooner or later.

I believe that an average American citizen is fully capable of being in the top 20th percentile of income earners. That number is presently $130,545. Not to do so is a choice that most of us make or have made in our earning careers.

There are of course, many people who, because of physical, mental circumstances, or just plain bad luck, who do not have that opportunity to make the decision to earn more, but that number is relatively small.

Having the opportunity to observe alternative career paths has a lot to do with improving your earnings. If you’re stuck in a job digging ditches 24/7 you won’t have the opportunity to observe a fortune 500 VP at work very often. But putting yourself in a position to observe something better is a decision that is most often our choice.

People by and large are risk averse. As a general rule, given the same odds, we are willing to pay about twice as much to avoid a loss as we are willing to pay to obtain a gain. It’s the people who are willing to spend as much or more of their perceived personal currency, (time, physical effort, cognitive effort, real assets, etc) that tend to break out of the working class they find themselves when they begin their earning years.

Relatively small? Please cite data on this.

There are many people who have not had the benefit of good education, good health, etc. and are stuck in minimum wage jobs – a wage that has not changed in many years, and is not a livable wage.
There are many people who patch together 2,3 jobs to support themselves and their family.
What you say might be true for college grads, but not for the working poor.
I would wager that you haven’t been around or talked to many of the working poor.

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I am a high-school dropout (9th grade,) and have never obtained a HS or college diploma. I joined the Navy at 17 and while there tested out for GED HS and 1 year of college equivalency. after my Navy service, I got a job with IBM as a typewriter repairman. From there I worked my way into marketing and strategic planning. After a 30-year IBM career, I worked as a self-employed K-12 Educational consultant for 5 years and then became a real estate broker for 12 years.

I came from a broken home and had one pair of trousers, one pair of shoes and two shirts to wear to school. During my working lifetime I’ve been poor, worked with the disadvantaged as a CASA volunteer and dealt with the challenges of the underprivileged as a participant, an observer and a volunteer. In those roles I have had the opportunity to experience first-hand the impact of the causative reasons behind the simple fact that most people are capable of making more money than the do in their earning lifetimes.

I think you would lose your proposed wager, I speak from the experience of 8 decades of life.

Added: There are lots of people with stories similar to mine. I personally know at least 5 people with no college degree who came from humble beginnings and have each achieved individual net worths exceeding $10M.

Your story sounds very commendable, and yes, people (mostly men, more often white) have done as you have. If you had been, say, a black female 60 years ago, could you have done the same? But yours is also a story from a different era (who has a 30 year career at IBM anymore?).
Today’s world is quite different. Many jobs don’t have benefits; unions are all but gone; jobs are outsourced… Sure, there are more tech jobs for a certain sector of the population. But the wages, conditions, and opportunities for non-college people have not kept pace with the cost of living – hence people working for certain employers have to get food stamps and other assistance (which is really bailing out the corporation from paying a living wage).

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Thank you for being polite, but I don’t think my story is commendable, it is simply logical.

It shouldn’t take very long for anyone to figure out that working at a job where you are paid by the hour isn’t a good way to make money, it way too limiting because there’s only 24 hours in a day. Given that fact, it just doesn’t make sense to offer to sell your physical or cognitive efforts to an employer who will simply accept the lowest bidder. The average human’s cognitive output is way too valuable to restrict to that finite extent. It’s a losing proposition for all but the employer.

The problem for many people is that they accept the “norm.” That is, they believe that they are limited to the choices offered them by our institutions of “higher” learning. The existing instructors, purveyors, leaders and products (graduates) of that system have convinced most of the world that is the case. It is not.

And while you may think that 2022 is somehow different than 1972 when it comes to the basics of earning an income, you are wrong. The key to making money is knowing about people. Knowing why people do things is far more important than knowing the what, when, how and where people do things. That basic ingredient has not changed in hundreds of years.

The problem is that the gatekeepers of jobs in our society are made up of the products of our educational system. I ran into these inbred decision makers throughout my working lifetime. But if you understand the “why” people do what they do, you can easily circumvent those roadblocks.

You’re correct Nancy. I’ll admit I was in a position to take advantage of the 401 during the last dozen years of my working life. The company I worked for didn’t initially terminate the already established defined retirement plan, so I sorta got the best of both worlds on that score when I retired. I also didn’t hurt that the bulk of my 401k investments were in place during the Clinton years, and I was able to basically depart the stockholding part while the getting was good before the inevitable crash after the Clinton years and the inevitable GOP meltdown. That being said, the introduction of the 401ks made it almost a sure thing the companies would eventually do away with defined retirement plans for most and throw the burden of investing for retirement upon the employee. And, as you say, many workers don’t earn enough to participate fully in a 401 as their earnings tend to cover week-to-week expenses if they’re lucky.

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The extremally low interest rates by banks gives a new meaning to “bank robbery”.

The low bank savings interest rates were a product of action taken by our federal government. The Central Bank originally made them low in the process of bolstering confidence in our monetary system thru “quantitative easing.” Quantitative easing, (QE) is the process of buying up debt in order to release more money and lower the prices of those purchased debts. More money means cheaper money, cheaper money means lower interest rates.

So you could say, in large part it was the private sector’s fault because the government action taken to fix the financial crisis caused by the private sector resulted in an extended period of historically low interest rates.

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