56 million US workers can’t afford to retire in 2023 due to rising costs and reliance on Social Security benefits. 40% admit retirement strategy has been derailed, 61% fear running out of money. The retirement crisis is costing the government and taxpayers more than one trillion dollars, with the age dependency ratio expected to grow by 50% in the next two decades.
New studies show that 56 million US workers can’t afford to retire in 2023. Many do not have a single dollar saved for their future, let alone a retirement plan. With the cost of basic necessities going through the roof, it’s getting increasingly challenging for people to start putting money aside for their senior years. The reliance many groups have on Social Security benefits is rapidly depleting this important government fund, and leaving Americans in an extremely precarious financial situation. According to Pew Research estimates, US households will be forced to pay over $13,000 more in taxes every year to fund the retirements of our aging population. This means that even younger generations will feel the impact of this worsening crisis, and many of us will have to lower our living standards to be able to make ends meet.
Today, almost half of Americans say that everyday expenses are rising so rapidly that they won’t be able to afford basic necessities in the future, and this is seen as one of the greatest risks to retirement success. This percentage is up from 44% in 2022 and 38% in 2021, according to Allianz Life. Troublingly, about 40% of US workers admit their retirement strategy has been derailed, and they aren’t sure when or how they’ll get it back on track. Other stats reveal that a remarkable 61% of Americans say they are more afraid of running out of money than they are of dying, with many of them unsure about their real chances of ever achieving a successful financial future by the time they reach retirement age.
It’s not just older workers without a big brokerage account balance who are in trouble. The fact that so many people don’t have enough money to fund their basic spending is going to cost the government more than one trillion dollars when it has to step in to provide assistance, especially when it collects less tax revenue from American workers.
A separate analysis by the Pew Research Center estimates the federal government is going to incur costs of about $964 billion between 2023 and 2040 due to insufficient retirement savings, while states will spend an estimated $334 billion. Their calculations expose that this amounts to $1.3 trillion in costs that governments — and thus taxpayers — will have to bear.
To make things even more complicated, as our population ages, there will be fewer workers relative to the number of seniors facing these shortfalls, so a smaller number of people will need to cover these big costs. In fact, the analysis highlights that the age dependency ratio — the ratio of households with people at least age 65 to those of working age — is expected to grow by nearly 50% in the next two decades. Pew reports that the additional taxpayer liability due to inadequate retirement savings will climb to about $13,600 per household.
We may not be seeing the worst of the retirement crisis just yet, but it’s clear that it is already here. We should pay very close attention to the challenges Baby Boomers are facing today becase is similar fate is waiting for us. They were once the richest generation in America, and now millions of them are becoming financially insecure and getting closer to poverty. With a recession at our door, our future looks uncertain, and at this point, we should start doing everything on our power to change the course of things before our living standards deteriorate even further.