The article I have chosen is
entitled “The challenge of getting Americans to save more.” This article discusses pensions and the
problems that arise when economists attempt to motivate Americans to save their
own money in private accounts without relying on Social Security. The article goes into detail on how Social
Security may not be perfect, but the finances can be fixed in a manageable
manor. It also states that the rumors of
Social Security not being around for our younger generation are not true. The main issue on this topic is the confusion
that many people have, believing that Social Security is a means of insurance
against poverty in old age and a means of income replacement for those in
middle age. Many people also hold the
misconception that Social Security is a saving scheme for a comfortable
retirement, which is also false. Social
Security will in no way provide enough money for one to live off of based off
of an average middle class income. This article states, “A 45-year old who earns $35,000 can only
expect about $16,000 a year from Social Security when he retires. If he earns
the median income, about $50,000, he'll get about $20,000. According to the 2009 Survey of Consumer
Finance the median
financial (does not include housing) wealth for people approaching retirement
is about $70,000. That will provide about $3,500 of inflation-protected income
a year in retirement—not much to live on.”
Basically this is saying the need to save more is very relevant.
The article states the two
different ways of creating more funds during retirement and they are either
increasing benefits given by the government, which is taking money (in tax form)
from younger generations or savings.
With the first method being highly frowned upon, the only other form of
creating a substantial amount of retirement reserves is to save more on your
own throughout your lifetime. The method
that could make this possible is to create easier access and incentives to save
money in private accounts. In a ‘perfect
world’ the government could establish government-sponsored accounts to aid
Americans in saving. Though a large majority
saw George W. Bush as a political bust, this was one of his ideas that got
quickly kicked to the curb because he presented it using the words “private”
and “Social Security” in the same sentence, which is truly unfortunate.
One benefit of a
government-sponsored savings account would be the access and ability to see how
much someone is actually saving. Though
it may be hard for a lower-income family to save five percent of their income,
the account would not require them the large contributions to Social Security
and they would be able to contribute what they can afford into this account and
save it at a higher interest rate than a normal bank, to have when they are
able to retire. Those who fall in
lower-income to middle-income workers are the people that end up struggling in
retirement because they are unable to save throughout their life.
One major downside to this argument
is that in the macro scheme of this, it would encourage people to save more
than consume and it would put a damper on the overall growth of the economy,
but is it not a greater burden to have people facing poverty in
retirement? Though this goal may not be
attainable until advanced middle age because of higher wages being earned
during this time, people will no longer have young children to care for, and
possibly have paid off the mortgage; it is still in the best interest of
Americans to start saving early and often in life to prepare for a wealthy
retirement. It is wrong to rely on
Social Security for the later period of your lifetime.
S., A. C. "Pensions: The
Challenge of Getting Americans to save more." The Economist. The
Economist, 21 Mar. 2012. Web. 15 Apr. 2013.
This article brings up a very unspoken subject for our generation. When dealing with social security, very few young adults have even thought about the subject. I was reassured to see that the article said that social security would still be around for our generation’s retirement. But this article did bring up the fact that one could not survive off social security, of which I was not aware. Given I have not put much thought into my retirement plan when I have barely even entered the workforce, but maybe that’s what the title of the article “The challenge if getting Americans to save” really confronted. The lack of knowledge of the future has really caused us to fall behind with our savings. It is hard to know what or how to save for retirement when one has almost 45 years till they have to face it. Many may believe that they must use that money to invest in a nearer future like college. So my major issue with this article was the unrealistic expectations that the Americans are suppose to fulfill.
ReplyDeleteI strongly disagree with the first method of creating more funds for the retired population, by increasing funds given by the government. This involves taking more money from the younger generations. This also sets back further individual savings for the youth. It is hard to show that these funds will be returned during our generation’s retirement, but there are no guarantees. The other method is to create one’s own retirement savings and building on it throughout their retirement. This in my opinion is too unrealistic. It is a good concept, but no one thinks enough ahead to implement this plan. I am sure a very low percentage of Americans could fulfill this plan successfully.
I also do not think that the government sponsoring these American savings accounts would be a good idea. I feel that this would give the government control when it comes to how Americans use their money. I feel this is a tricky line that should not be crossed. It also would only have negative effects on the economy. When people are saving more, there is less money in circulation, which could put us in another recession. While it is a nice idea of having incentive to save more and provide one’s self with a better future, I feel it would only have negative effects in the immediate future. But overall, I feel this article is important for young adults to read, because it does bring awareness to the topic of savings.