Published on Alternet (http://www.alternet.org)
Home > Wall Street Journal Says $19,000 a Year Is Adequate Middle-Class
Retirement Income
________________________________________
Wall Street Journal Says $19,000 a Year Is Adequate Middle-Class Retirement
Income
By Dean Baker [1] / Beat the Press
January 6, 2016
While economic debates can often get into complex questions of theory or
statistical methods, many hang on more simple issues, like the right
adjective. We got a great example of one such debate in a Wall Street
journal column [2] by Andrew Biggs, an economist at the American Enterprise
Institute and former Deputy Commissioner of the Social Security
Administration under President George W. Bush.
Biggs looks at some recent evidence, most notably a new study from the
Congressional Budget Office (CBO), and dismisses the idea that there is a
retirement crisis. At the center of this assertion is the CBO projection
that a typical household in the middle quintile, born in 1960, can expect to
get $19,000 a year from Social Security. Biggs sees this $19,000 as
replacing 56 percent of pre-retirement income and says this is not far from
the 70-80 percent usually viewed as adequate. He then touts data on total
retirement savings and pronounces everything as okay.
If we step back from replacement rates, we can ask a rhetorical question, is
$19,000 a year a middle class income? Odds are that most people would not
consider $19,000 a reasonable income for a middle class household, hence the
basis for the claim about a retirement crisis. Biggs does point to the
record amount of retirement savings. This is indeed good news for those who
have these savings, but unfortunately most middle class households don't
fall into this category.
According to the Federal Reserve Board's 2013 Survey of Consumer Finance
[3], the average net worth outside of housing equity for the middle quintile
of households between the ages of 55 and 64 was less than $55,000. This
includes all IRAs, 401(k)s and other retirement accounts. This will
translate into roughly $3,000 a year in additional retirement income,
bringing this middle income household's income up to $22,000 a year.
Biggs looks at this and says everything is just fine and we should be
looking to cut Social Security. Those raising concerns about a retirement
crisis do not see $22,000 a year as a middle class income. We are just
arguing about adjectives here, there is not much disagreement on the
situation.
Dean Baker [4] is the co-director of the Center for Economic and Policy
Research [5] (CEPR). His most recent book is Plunder and Blunder: The Rise
and Fall of the Bubble Economy [6]. He also has a blog, Beat the Press [7].
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Source URL:
http://www.alternet.org/economy/wall-street-journal-says-19000-year-adequate
-middle-class-retirement-income
Links:
[1] http://www.alternet.org/authors/dean-baker-0
[2]
http://www.wsj.com/articles/new-evidence-on-the-phony-retirement-crisis-1451
952646
[3] http://cepr.net/documents/wealth-scf-2014-10.pdf
[4] mailto:cepr@xxxxxxxx
[5] http://www.cepr.net/
[6] http://www.amazon.com/dp/0981576990?tag=commondreams-20/ref=nosim
[7] http://www.cepr.net/index.php/beat-the-press/
[8] mailto:corrections@xxxxxxxxxxxx?Subject=Typo on Wall Street Journal Says
$19,000 a Year Is Adequate Middle-Class Retirement Income
[9] http://www.alternet.org/
[10] http://www.alternet.org/%2Bnew_src%2B
Published on Alternet (http://www.alternet.org)
Home > Wall Street Journal Says $19,000 a Year Is Adequate Middle-Class
Retirement Income
Wall Street Journal Says $19,000 a Year Is Adequate Middle-Class Retirement
Income
By Dean Baker [1] / Beat the Press
January 6, 2016
While economic debates can often get into complex questions of theory or
statistical methods, many hang on more simple issues, like the right
adjective. We got a great example of one such debate in a Wall Street
journal column [2] by Andrew Biggs, an economist at the American Enterprise
Institute and former Deputy Commissioner of the Social Security
Administration under President George W. Bush.
Biggs looks at some recent evidence, most notably a new study from the
Congressional Budget Office (CBO), and dismisses the idea that there is a
retirement crisis. At the center of this assertion is the CBO projection
that a typical household in the middle quintile, born in 1960, can expect to
get $19,000 a year from Social Security. Biggs sees this $19,000 as
replacing 56 percent of pre-retirement income and says this is not far from
the 70-80 percent usually viewed as adequate. He then touts data on total
retirement savings and pronounces everything as okay.
If we step back from replacement rates, we can ask a rhetorical question, is
$19,000 a year a middle class income? Odds are that most people would not
consider $19,000 a reasonable income for a middle class household, hence the
basis for the claim about a retirement crisis. Biggs does point to the
record amount of retirement savings. This is indeed good news for those who
have these savings, but unfortunately most middle class households don't
fall into this category.
According to the Federal Reserve Board's 2013 Survey of Consumer Finance
[3], the average net worth outside of housing equity for the middle quintile
of households between the ages of 55 and 64 was less than $55,000. This
includes all IRAs, 401(k)s and other retirement accounts. This will
translate into roughly $3,000 a year in additional retirement income,
bringing this middle income household's income up to $22,000 a year.
Biggs looks at this and says everything is just fine and we should be
looking to cut Social Security. Those raising concerns about a retirement
crisis do not see $22,000 a year as a middle class income. We are just
arguing about adjectives here, there is not much disagreement on the
situation.
Dean Baker [4] is the co-director of the Center for Economic and Policy
Research [5] (CEPR). His most recent book is Plunder and Blunder: The Rise
and Fall of the Bubble Economy [6]. He also has a blog, Beat the Press [7].
Error! Hyperlink reference not valid.
Error! Hyperlink reference not valid.
Report typos and corrections to 'corrections@xxxxxxxxxxxx'. [8]
Error! Hyperlink reference not valid.[9]
Source URL:
http://www.alternet.org/economy/wall-street-journal-says-19000-year-adequate
-middle-class-retirement-income
Links:
[1] http://www.alternet.org/authors/dean-baker-0
[2]
http://www.wsj.com/articles/new-evidence-on-the-phony-retirement-crisis-1451
952646
[3] http://cepr.net/documents/wealth-scf-2014-10.pdf
[4] mailto:cepr@xxxxxxxx
[5] http://www.cepr.net/
[6] http://www.amazon.com/dp/0981576990?tag=commondreams-20/ref=nosim
[7] http://www.cepr.net/index.php/beat-the-press/
[8] mailto:corrections@xxxxxxxxxxxx?Subject=Typo on Wall Street Journal Says
$19,000 a Year Is Adequate Middle-Class Retirement Income
[9] http://www.alternet.org/
[10] http://www.alternet.org/%2Bnew_src%2B