Many Americans are nearing retirement with only Social Security to support them and a mortgage that is far from paid off — and the situation might be getting worse.
According to Dean Baker, co-director of the Center for Economic and Policy Research, the nest egg that many could once rely on when they sold their homes and downsized has now vanished in a lot of cases.
In a column for Fortune
, Baker noted that because home prices are still considerably below their 2007 peaks, the U.S. middle class has had no comparable gains in their household wealth during the current recovery.
"This is a bad picture for the country as a whole, but it is especially bad news for those at the edge of retirement," he wrote.
"These families do not have time for an economic turnaround to improve their situation. They must rely on the wealth they have accumulated to date to support them in retirement, and that is it. This is not a pretty picture."
Federal Reserve data show that if a typical U.S. family in the 55 to 64 age group took all their savings and used it to pay off their mortgage, they would still owe more than $50,000 on the median house.
Baker said that the middle quintile of Americans in that age group has only 54.6 percent of their home paid off on average. "By comparison, in 1989, this group on average had equity equal to 81 percent of their house price, meaning that many could look forward to a retirement in which their mortgage was already paid off."
What's more that same middle quintile had an average of $169,000 in wealth in 2013 — down an alarming $150,000 from the group's peak wealth in Fed data from 2004.
Baker said Americans in the 55 to 64 age group who are below the middle quintile in wealth have done even worse in recent years.
"As a result they will be overwhelmingly dependent on Social Security and Medicare in their retirement years. Those who envision a population of affluent elderly who can easily get by with cuts in these programs are not looking at the data," he concluded.
According to the National Institute on Retirement Security, 45 percent of working households have no retirement savings at all, according to U.S. News & World Report
. In fact, among people 55 to 64, average — as opposed to median — household retirement savings total only $12,000.
The problem is that the average Social Security payment for retired workers in 2014 is approximately $1,300.
"The rule of thumb for retirement accounts is that you should withdraw no more than 4 percent a year. If you have $100,000 in savings, that means $4,000 a year, or about $333 per month," U.S. News said.
Even among those Americans who do have savings, they are keeping much of it in cash instead of stocks or related investments, which ensures their holdings barely grow at all at today's interest rates, CBS Moneywatch
"So the longer that they are holding cash, the further and further they are getting behind in saving for their future," Robert Kapito, president of BlackRock, told CBS News.
© 2021 Newsmax Finance. All rights reserved.