FORBES

Aug 21, 2019, 11:24am

 

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For far too many older workers in the U.S., the prospect of retirement prompts a scary question: Can I get by on Social Security alone? Although we’re told to save throughout our working lives, many Americans simply lack the means to build up a 401(k) or IRA. Currently, about one in three older workers have essentially zero in retirement savings.

For tens of millions of Americans, then, Social Security is the last best hope. But is it enough? On a recent episode of my podcast Reset Retirement, we tackled this very question. It may be possible to live on Social Security—but not if you want to maintain some semblance of the quality of life you had before.

To get a sense of what it’s like to depend almost entirely on Social Security, I spoke with David Holmberg, a longtime journalist and writer who, now 80, has found himself with no savings and little income outside of Social Security checks. Like many of those who lack a sizable nest egg, David had many different employers throughout his career, never managing to stay long enough at any one job to get a pension or large 401(k).

“The long view of it is that I was an itinerant journalist who never worked for more than five years in one place,” David told me. After leaving the ailing newspaper industry at 60, he began freelancing and adjunct teaching, but it wasn’t enough. Another unpredictable life event—divorce—led David into what he calls a “slide into Social Security dependency.”

David’s lack of savings makes retirement more a dream than reality. “I have literally never retired,” David said. “I left the newspaper business, but that does not constitute retirement. I’ve literally been scrambling for 20 years.”

It’s not that David saved up nothing. A minor stock portfolio and the value of a house he sold kept David afloat for a few years. But after that it was just Social Security—and downward mobility. “The struggle, particularly if you’re living in New York or New Jersey, is to maintain a middle- to upper-middle class life,” David said.

Is Social Security “enough?” David maintains what he calls a “spartan diet” and rents a studio apartment in New Jersey for $700 a month (recently increased from $600). Still, money is tight. “The stress of Social Security is simply a matter of getting through every month without desperately asking my ex-wife for money, which I started to do only recently,” David said.

And then there’s health. David is on Medicare, but he worries that he is still unprepared for a major medical episode: “I’m a little bit apprehensive about when I get something serious and it’s going to kill me. But I just sort of pretend that’s not gonna happen.”

David is just one among the millions of retirees and near-retirees—most of them women—who depend totally or almost totally on Social Security. We are often told that retirement should be a three-legged stool made up of Social Security, employee-sponsored plans, and private savings. But this model no longer matches the reality.

As economist Tony Webb explained, Social Security keeps more people afloat in old age than we might expect: “One-third of retirees are dependent on Social Security for 90% or more of their income. And over 60% are depending on the program for more than half of their income.”

For those who do depend on Social Security, each passing year means doing more with less. The purchasing power of the typical Social Security beneficiary has fallen by 34% since 2000 , according to research from the Senior Citizens League,

Medical costs are a major culprit. Benefits checks rise to keep pace with cost-of-living adjustments, but Medicare premiums—which rise faster than inflation—take up a growing slice. “That means that in some years, retirees may have no dollar increase in their Social Security check,” Webb told me.

Bottom line: Yes, you can live on Social Security, if staying alive is the goal. But those who do live largely or entirely on Social Security will face downward mobility in retirement—a reality that an expected 40% of older workers now face.

There is, however, a bright spot (we always include one bright spot on the podcast). Legislators have recently begun discussing the insufficiency of current Social Security benefits and expansion is on the table. The hearings organized in July by Rep. John Larson (D-CT) marked the first time in a half-century that Congress formally discussed expanding Social Security.

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Morgan & Weisbrod LLP

by Paul B. Burkhalter
Managing Partner of Morgan & Weisbrod, Board Certified in Social Security Disability Law.

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