Yes, Americans are saving enough for retirement

Nevertheless, my position is unchanged. Baby boomers, in particular, are going into retirement better prepared than previous generations. The U.S. retirement system certainly has room for improvement. But Americans don't need more generous pensions, subsidies, or access to private equities and active management. Let's stick with what's working.

Consider those boomers and near-boomers. In 2022, Americans aged 60 and over had a median net worth of $448,000 and $87,000 in financial assets (in 2026 dollars). That may not sound like a lot to retire with. But in 1989, the same age group only had $210,000 in net worth and $45,000 in financial assets. It is also true that people are living longer — but they also tend to have less physically demanding jobs, which opens the potential for longer careers and more years of saving.

To be sure, these are averages, and some people are struggling. About 5% of Americans have only Social Security — but they tend to be people who had lower incomes while working and could not afford to save much. Social Security replaces a large share of their income, leaving many low-earning retirees better off than when they were working. Encouraging lower earners to devote more of their limited resources to retirement saving could make them worse off.

And Social Security and Medicare have become more generous over time. Older Americans are the least likely to live in poverty compared to other age groups. The government spends five times more on people over 65 compared to people under 18, and the older group just got a $6,000 tax credit.

The news gets better: Younger generations have even more financial assets than boomers did at their age. It is probably true most people would be even better off if they saved more. But if other generations got by, odds are that this one will, too. The bottom line is that a lack of retirement savings is not this country's most pressing problem, and more tax benefits and subsidies for the elderly should not be its main priority.

One big reason retirees have more money is the move to defined-contribution pensions such as 401(k)s, which became popular in the 1980s. They are cheaper for employers and more portable across jobs, resulting in more consistent coverage. The period since the '80s has also coincided with tremendous stock market gains, which made retirement accounts look even better. But market exposure means bearing more risk, and with a volatile stock market, the costs of a taking on that risk may soon be felt. There is no guarantee that the future will be as good as the past.

The asset management industry says it has a solution: Retirees should pay more fees by investing in active managed funds or private equity. This is exactly what they don't need. BlackRock argues this will reduce risk, but it will do the opposite. Returns might look higher on paper, yet individual retirement accounts are not hedged properly to ensure predictable income in retirement, which should be the goal.

Getting people to save more for retirement was the hard part, and America has mostly succeeded. Sure, it's always better to save more, but it is hard to argue that Americans aren't saving enough for retirement. If you're reading this, you're probably doing OK in terms of how much you save. And if you avoid high fees or anything fancy, you are probably investing reasonably well and can survive a market downturn.

The federal government does not need to spend more on the elderly. The priority should be putting entitlements on a sustainable path, offering investors better options to reduce risk, and helping people get a predictable income once they retire. That's easier than getting people to save or promising a shiny new benefit — but it's not nearly as exciting.

(COMMENT, BELOW)

Allison Schrager, a Bloomberg columnist, is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.

Previously:
• Is free trade worth the cost in lives lost?
• Mamdani's New York is flirting with fiscal nihilism
• America's human capital is eroding
• Musk is wrong about AI and retirement --- You still need to save
• Go ahead and resent boomers but for the right reasons
• Raiding your 401(k) to buy a house should be an option
• Americans are living in the worst of all tax worlds
• Think of college like you would a junk bond
• The economy needs a little bit of unfairness
• The pension revolution is better for savers
• Affordability isn't a hoax. It's not a crisis for most, either
• America gets retirement wrong. Can Vanguard fix that?
• The American middle class is shrinking, and that's OK
• Want to buy a home? It's OK to wait till you're 40
• Mamdani is benefiting from New York City's changing workforce
• How can an economy this good feel this bad?
• Why boomers have more money than everyone else
• Democratize private investment?
• Lab-grown diamonds are testing the power of markets
• Inflation ate your free lunch, but you're still better off
• Good debt? Bad debt? There's no such thing
• Megabills didn't break the economy before and won't now
• America's broken politics is breaking economics, too
• A college degree is no longer a risk-free investment
• Break up Columbia? Maybe, and the rest of the Ivy League, too
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• Reality Check about possibile volatility in trade war
• Is this really how American exceptionalism ends?
• The free-market conservative is a vanishing breed
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• To bring back the office, bring back lunch
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• A soft landing won't mean the economy is safe
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• Say it with Rubio: Changing clocks is stupid
• Sure, we'll return to the office in 2023 but not to stores
• How to manage the biggest risk of all: Uncertainty
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• Harry and Meghan and the perils of superstar culture
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• Buck up, boomers. You're still better off than your parents
• How to manage the biggest risk of all: uncertainty
• Startup boom is the kind of risk-taking Americans need
• Gen Z is too compliant to achieve greatness
• A bigger child tax credit isn't the poverty solution we need
• Finding your power in a higher-priced world
• The Biden administration's plans to double the tax rate on capital gains will prove costly to all Americans, not just the wealthy
• WARNING: Feel Good Now --- Pay Later: Stimulus is crammed with goodies but makes no economic sense
• The 'Stakeholder' Fallacy: Joe Biden's vision of capitalism is a recipe for failure