Source: http://www.creaders.net 2012-08-11 00:17:09

Reuters has published a story saying that at present the American elderly belong to the group of better off in the society. But the following generation, which is now ready to retire - such as the baby boomers - will not be so lucky. Reduced pensions, lowered social security and the real estate bubble mean that the middle class and low-income elderly will face an impoverished old age.

Social security and pensions have always been the main factor helping the elderly out of poverty. In addition, the net worth of their house is also an important source as guaranteed financial resource for the elderly, because their home mortgages are usually paid off and unpaid debts are also relatively small. In 2010, the elderly poor accounted for only 9% of the U.S. elderly population and the population living below the poverty line accounted for 15% of the total U.S. population.

But now people's standard of living is declining. Large companies like General Motors and Ford have announced suspension of the pension plans of thousands of retirees. Government departments are also facing economic pressure and have to significantly reduce pensions and lower benefits.

For the middle class and low income people, pensions are very important. Statistics show that more than half of Americans over the age of 60 are pensioners.

For the elderly to stay out of poverty, social security also plays a big role. According to government statistics, 45 percent of the American elderly will fall below the poverty line in the absence of social security. Without social security, the number of the elderly poor will reach 14 million.

Now the government has pushed back the normal retirement age from 65 to 67. For those who will reach the retirement age of 67 in 2022, their welfare will be reduced by 13% compared to retirement at 65. The government’s postponement of the retirement age is actually not benefiting anyone.

Then, can 401Ks or IRAs help the economy after retirement? These are actually only relevant to the relatively wealthy families.

According to research, only about 14 percent of households in the United States have enough money to maintain a comfortable retirement life. Approximately 60% of the households have less than $25,000 in all their deposits and investments counted together (house not included).

When it comes to their house, the net assets of many elderly people were lost because of the real estate bubble. There are 3.5 million homeowners over the age of 50 in the United States with their house prices still "under the water" - meaning higher arrears than the home value.

For these elderly poor, the only solution is to work longer - if health permits. But it is not so easy to work longer. According to government data, among the persons who retired this year, 50% retired earlier than expected.  The reasons for earlier retirement included: health (representing 51%), corporate restructuring (21%), and taking care of sick family members (19%).

Now the Obama administration is doing its upmost to launch a series of policies. The initiatives of local governments are even more ambitious. Several states are considering the establishment of the so-called Hybrid Cash Balance Pension Plan to replace the dwindling pension.