America’s Retirement Crisis Is a Financial Crisis Too

America is facing a retirement crisis. Most experts agree that a significant portion of the population will lack the resources to live comfortably after they stop working. This, in turn, will place an increasing burden on the country’s social safety net.

Exactly how big is the problem? Put it this way: Under reasonable assumptions, it could overwhelm state budgets across the country.

Once upon a time, as recently as the late 19th century, Americans typically worked until they died — which they could expect to happen, on average, before age 65. With the exception of the rare military pension, the old and infirm relied on charity or extended families for support.

That all changed amid the rapid industrialization and rising prosperity of the 20th century. Life expectancy for those who reached working age shot upward: As of 2018, it was almost 77 for men and 82 for women. Companies, which increasingly dominated the economy, proved unwilling to employ older workers, whom they saw as less productive. For an increasing number of people, a period of idleness became possible, even inevitable.

The government recognized the new reality by establishing Social Security in 1935. The program initially started paying benefits at age 65, which became the official retirement threshold. Yet it was never intended to provide more than a bare minimum income. To maintain a decent standard of living, people (or their employers) had to do something they had rarely done before: set aside enough money for life after work.