We need an across the board increase in Social Security retirement benefits of 20% or more. We need it to happen right now, even if that means raising taxes on high incomes or removing the salary cap in Social Security taxes.
Over the past few decades, employees fortunate enough to have employer-based retirement benefits have been shifted from defined benefit plans to defined contribution plans. We are now seeing the results of that grand experiment, and they are frightening. Recent and near-retirees, the first major cohort of the 401(k) era, do not have nearly enough in retirement savings to even come close to maintaining their current lifestyles.
Frankly, that's an optimistic way of putting it. Let me be alarmist for a moment, because the fact is the numbers are truly alarming. We should be worried that large numbers of people nearing retirement will be unable to keep their homes or continue to pay their rent.
According to the Center for Retirement Research at Boston College, the median household retirement account balance in 2010 for workers between the ages of 55-64 was just $120,000. For people expecting to retire at around age 65, and to live for another 15 years or more, this will provide for only a trivial supplement to Social Security benefits.
And that's for people who actually have a retirement account of some kind. A third of households do not. For these people, their sole retirement income, aside from potential aid from friends and family, comes from Social Security, for which the current average monthly benefit is $1,230.
If the consensus is that we need policies in place to ensure that the vast majority of people have at least a comfortable retirement, then we need to adjust our current failing policies. Expecting people to save sufficiently for their retirement, even if those savings are subsidized by our tax code, is unrealistic.
This is the mentality which holds sway among so many of our elected officials.