But What About Our Kids?

            Readers are concerned, but not about themselves. They are worried about their kids.

            That’s the message I got from retired readers. They agreed with my recent column about finding retirement “comfortable.” But they also worried it wouldn’t be that way for their kids. They provided a long list of reasons to explain the difference.

            Before we go on, let’s talk about the word “kids.”

            Retirees have a different idea of “kids” than younger, working folks. My wife and I, for instance, have three kids. They range in age from 53 to 59. All three are eligible for AARP membership. Their “kids,” in turn, have finished college and are employed.

            It’s fair to say there’s a bit of a conceptual gap here.

            Here’s a list of differences retired readers have mentioned (I’ve added some amounts, dates and related figures to provide a broader context):

—EXTINCT PENSIONS. Gone. No more monthly income security in retirement provided by your doting lifetime former employer. Pensions became common during World War II, but corporations started to close them after the OPEC economic crisis in ’73- ‘74. The decline accelerated with the introduction of 401(k) plans in 1978 and their wide adoption as pension substitutes in the mid-1980s. Workers who had pensions and long-term jobs could be pretty sure that a combination of Social Security and their monthly pension check would be a “comfortable” amount. Not now.

—401(k) PLANS. Sold as a great replacement for the uncertainty of corporate pensions and a tool for making workers part-owners of American business, they shifted responsibility and decision-making to unprepared workers while cutting corporate expenses by half or more. Even now many companies don’t offer the plans, participation and contribution rates can be low, and plan expenses vary greatly.

            Result?

            Workers could own assets rather than corporate promises.  But figuring out how much to save, how to invest and how to provide a lifetime of income became a major problem.

—SOCIAL SECURITY. While the under-funding of Social Security was a problem from its start, it became a serious problem as the Witless 535, otherwise known as Congress, have borrowed our country into massive debt with perpetual deficits. They did this by cutting taxes (Republicans) while increasing spending (Democrats). Today, any worker in his or her early 50s faces retiring into a cut in benefits.

            All this happened while the size of the Social Security portion of the employment tax (now 12.4 percent of wages, combined employee, employer contributions) has risen along with the wage cap on the tax.

Here are some sample figures. In 1962, the year I graduated from college, a typical college graduate could expect to stop paying the employment tax around September because their starting wage, a bit under $6,000, was greater than the $4,800 wage base maximum. The cost was 3.125 percent of wages for the employee.

Today, a recent college graduate can expect to earn $68,516 and may never earn more than the current wage cap of $168,600 while paying their half of the employment tax at 6.2 percent.

            Those are the biggest factors.  But it’s not the end of the list. In addition, readers mentioned the high(er) cost of education, health insurance, health care and home prices.  Add it all up and things look a lot harder for the young compared to the elderly.

            And they may be.

           Or not.

            Consider how the future looked in past decades.

—1930s. Fears of permanent depression, endless deflation, no Social Security, limited homeownership, rising fascism in Europe and rising communism worldwide. Not a lot of hope for the future there.

—1940s. Devastating World War, inflation 5.4 percent, spreading communism, threat of nuclear war, then threat of post-war economic collapse.

—1950s. Threat of thermonuclear war, Korean war, McCarthyism, labor union strife but relatively stable inflation at 2.2 percent annualized. Many view the 50s as “the good old days.” (If music is your thing, it may have been, thanks to Texans Buddy Holly and Roy Orbison, not to mention Bo Diddley, Elvis and many others.)

—1960s. Vietnam war, assassinations, bank burnings, rising interest rates, falling homeownership, college riots, mass protests.

—1970s. Inflation soars at 7.4 percent annualized for decade, many pension plans bankrupt, worst stock market since the Great Depression, energy and home prices soar as mortgage interest rates nearly triple.

            This is what the future looked like for anyone who turned 21 before 1979.

            If the elderly survived all that, maybe the kids will handle their list too.

I’m certain of just one thing. The “kids, “once grown, will worry about their own kids.

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Related columns:

Scott Burns, “Retirement May Be More Comfortable Than You Think,” 10/6/2024: https://scottburns.com/retirement-may-be-more-comfortable-than-you-think/

Scott Burns, “The Supreme Grand Poobah Returns,” 12/31/2023: https://scottburns.com/the-supreme-grand-poobah-returns/

Scott Burns, “How to Save the World from Monopoly (The Game),” 4/25/2021: https://scottburns.com/how-to-save-the-world-from-monopoly-the-game/

Scott Burns, “What I’d Do to Save America,” 11/23/2019:  https://scottburns.com/what-id-do-to-save-america/

Scott Burns, “Going Down the Intermediary Drain,” 6/1/2014: https://scottburns.com/going-down-the-intermediary-drain/

Scott Burns, “The Only Tax Reform Worth Talking About,” 2/01/2005: https://scottburns.com/what-id-do-to-save-america/

Scott Burns, “Your Helicopter Is on the Way,” 6/29/2003: https://scottburns.com/your-helicopter-is-on-the-way/

This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.

Photo by Scott burns: A Tsunami of red poppy flowers on the Camino de Santiago, June 16, 2024

(c) Scott Burns, 2024