Articles written like this make me incredibly angry. Stop reading headlines and audit your news.
1. The entire basis of this "news" is a study which is cited exactly nowhere in the article. There is a passing reference to a "new study" by the "Schwartz Center for Economic Policy Analysis." They don't even give a partial author list, let alone a title!
2. This is the study in question.[1] I had to dig this up on my own by piecing together specific claims with the name of the research organization and searching for them. The study appears to be closer to policy advocation than new research.
3. The author is a business management consultant who cites himself and his company for data contributing to the article, with no alternative supporting source ("Managing Defined Benefit Plans"). If there's a bias here it doesn't seem to be explicitly called out.
I can't comment on the core findings of the study, but I find its presentation and reporting in this article to be disingenuous and poorly supported. I'm deeply skeptical of the headline's claim given the incredibly politicized nature of the topic, the utter lack of critical analysis and the (intentional or merely incompetent) obfuscation of source material.
If you're going to start a discussion about economic policy or financial trends, please find and submit the original study. This article is just noise - it's barely capable of engaging with its source material. Why is a CNBC article on HN instead of the primary source?
Thank you for pointing that out! But leaving warped science, politics and hidden advertising aside - given that there exists a certain amount of this kind of poverty - are things likely to improve in the future, or will they get worse?
Do you have any findings to the contrary? Otherwise this seems fully in the realm of possibility. If you're arguing there's sufficient evidence to reject these findings you're wrong.
I’m not sure being under the federal poverty line (or 2x cutoff as this article used) means the same thing at retirement age.
My mother, for example, has a monthly post-tax income of $1,400 or just under $17,000 per year. She must be poor right?
However, she owns her home outright. So her total reoccurring monthly expenses are around $1,200. That includes property tax, condo fees, health insurance premium, food and gas for the car. She has a very comfortable life. She would certainly not call herself poor.
She can basically live off her pension without touching the equity in her home or the savings she has (unless it’s for something important like travel).
A lot of people in retirement are no longer relying on income, instead they are taking money out of savings as well. Not sure if this paper accounted for that.
$17k is actually pretty good for a single person compared to many in this country. Try feeding four people on $20k a year. I know people who work three jobs (not all paid!) for $10k a year--they aren't homeless ONLY because they have a social safety net. Mind you, these are employable people in places without good jobs because of a general lack of remote work for no reason.
Nonetheless, the federal poverty line definition has no rational connection at all to what realistically constitutes a livable income. Just like your mother would be fucked if anything happened to her and she didn't have her social net (you, presumably).
What is "at risk"? A married couple is going to be getting over $4000/mo in Social Security, mostly tax free. Outside of a few metros, it's hard to see how that leaves one impoverished. The Baby Boomers are the whiniest generation ever.
"The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household."
You say $4000/mo for a couple = $48,000/yr – article says $15,730/yr for the worst off and $31,260/yr for the next worse off. Do you have a source for your figure?
Can you provide a citation? The data doesn't agree with your assertion.
"Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65, according to the study.
The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household."
Wait, this is sensationalized. Within the article the quote is "Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65..." And their definition of near poverty is twice the poverty level? If I can live comfortably on less than 75% of that in LA, I don't see how that could be considered poverty. The 2.6 million, which I assume implies 12% of middle class is what slip below the FPL.
The savings rate in the US has fallen continuously since 1906 when Insurers were prevented from cheating Tontine Pensioners out of their savings. Instead of selling Tontine Pensions honestly going forward, they switched to selling life annuities which were far more profitable for the Insurers.
The solution is to bring back the savings products customers want to buy (Tontines Trusts) but without the rent-seeking financial institutions.
Disclosure: I work for an insurance company that sells annuities. This is solely my own opinion, and I have no incentive to get you to buy an annuity.
With that out of the way, a few comments on this:
* Tontines were exorbitantly profitable for life insurers before they were outlawed - much more so than any modern products I’m aware of.
* Profitability is somewhat independent of product structure in that either a tontine or an annuity can be priced to achieve a given level of profitability.
* The structure of a tontine means that payments start off much lower than a life annuity and grow substantially (exponential growth with a growth rate that itself increases exponentially) over time. Most retirees would probably prefer a higher initial payment and lower growth rate, since the amount of income they need in retirement generally doesn’t increase that much over time.
* While annuities are reasonably profitable for insurers, profitability metrics are lower than you might expect. The vast majority of what I’ll loosely call “profit” goes to agents and “financial advisors” in the form of commissions, not to the insurance companies themselves. While they’re uncommon due to low demand, there are annuities that can be purchased directly from insurers (i.e., without paying a commission), and the rates are probably similar to what you’d get through a trust because the expenses scale well.
* If you’re totally opposed to any profit being captured by financial institutions’ shareholders, mutual insurance companies are owned directly by their policyholders and return profits to them in the form of dividends. The only potential advantage to a trust over a mutual insurance company is that the former might be able to back policies with riskier investments (and I’m not at all certain that that’s the case).
* While the personal savings rate in the US has declined since 1960, I’m not sure that that’s still true when going all the way back to the turn of the 20th century. Can you provide a source for that claim?
[+] [-] throwawaymath|7 years ago|reply
1. The entire basis of this "news" is a study which is cited exactly nowhere in the article. There is a passing reference to a "new study" by the "Schwartz Center for Economic Policy Analysis." They don't even give a partial author list, let alone a title!
2. This is the study in question.[1] I had to dig this up on my own by piecing together specific claims with the name of the research organization and searching for them. The study appears to be closer to policy advocation than new research.
3. The author is a business management consultant who cites himself and his company for data contributing to the article, with no alternative supporting source ("Managing Defined Benefit Plans"). If there's a bias here it doesn't seem to be explicitly called out.
I can't comment on the core findings of the study, but I find its presentation and reporting in this article to be disingenuous and poorly supported. I'm deeply skeptical of the headline's claim given the incredibly politicized nature of the topic, the utter lack of critical analysis and the (intentional or merely incompetent) obfuscation of source material.
If you're going to start a discussion about economic policy or financial trends, please find and submit the original study. This article is just noise - it's barely capable of engaging with its source material. Why is a CNBC article on HN instead of the primary source?
___________
1. https://www.economicpolicyresearch.org/images/docs/research/...
[+] [-] adamredwoods|7 years ago|reply
[+] [-] rapnie|7 years ago|reply
[+] [-] drb91|7 years ago|reply
[+] [-] refurb|7 years ago|reply
I’m not sure being under the federal poverty line (or 2x cutoff as this article used) means the same thing at retirement age.
My mother, for example, has a monthly post-tax income of $1,400 or just under $17,000 per year. She must be poor right?
However, she owns her home outright. So her total reoccurring monthly expenses are around $1,200. That includes property tax, condo fees, health insurance premium, food and gas for the car. She has a very comfortable life. She would certainly not call herself poor.
She can basically live off her pension without touching the equity in her home or the savings she has (unless it’s for something important like travel).
A lot of people in retirement are no longer relying on income, instead they are taking money out of savings as well. Not sure if this paper accounted for that.
[+] [-] drb91|7 years ago|reply
Nonetheless, the federal poverty line definition has no rational connection at all to what realistically constitutes a livable income. Just like your mother would be fucked if anything happened to her and she didn't have her social net (you, presumably).
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] murukesh_s|7 years ago|reply
[+] [-] paulgrant999|7 years ago|reply
Whats that do to her budget?
[+] [-] cameldrv|7 years ago|reply
[+] [-] igravious|7 years ago|reply
You say $4000/mo for a couple = $48,000/yr – article says $15,730/yr for the worst off and $31,260/yr for the next worse off. Do you have a source for your figure?
[+] [-] toomuchtodo|7 years ago|reply
"Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65, according to the study.
The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household."
[+] [-] laser|7 years ago|reply
[+] [-] rundmc|7 years ago|reply
[+] [-] tfehring|7 years ago|reply
With that out of the way, a few comments on this:
* Tontines were exorbitantly profitable for life insurers before they were outlawed - much more so than any modern products I’m aware of.
* Profitability is somewhat independent of product structure in that either a tontine or an annuity can be priced to achieve a given level of profitability.
* The structure of a tontine means that payments start off much lower than a life annuity and grow substantially (exponential growth with a growth rate that itself increases exponentially) over time. Most retirees would probably prefer a higher initial payment and lower growth rate, since the amount of income they need in retirement generally doesn’t increase that much over time.
* While annuities are reasonably profitable for insurers, profitability metrics are lower than you might expect. The vast majority of what I’ll loosely call “profit” goes to agents and “financial advisors” in the form of commissions, not to the insurance companies themselves. While they’re uncommon due to low demand, there are annuities that can be purchased directly from insurers (i.e., without paying a commission), and the rates are probably similar to what you’d get through a trust because the expenses scale well.
* If you’re totally opposed to any profit being captured by financial institutions’ shareholders, mutual insurance companies are owned directly by their policyholders and return profits to them in the form of dividends. The only potential advantage to a trust over a mutual insurance company is that the former might be able to back policies with riskier investments (and I’m not at all certain that that’s the case).
* While the personal savings rate in the US has declined since 1960, I’m not sure that that’s still true when going all the way back to the turn of the 20th century. Can you provide a source for that claim?
[+] [-] vfulco2|7 years ago|reply