Money, retirement and singles

How are Americans doing when it comes to being financially prepared for retirement? Lately, the answer seems to be, not well.

Still, economic researchers are delving deep into household finances to better understand how American's stack up financially for old age. These in-depth studies don't focus on one aspect of money and retirement, say, how much money is invested in 401(k)s for the average worker or the amount of non-pension savings for the average household. (Both sets of calculations are bleak.)

No, the latest economic studies try to take a broad brush picture of household finances, tapping into databanks that allow for including everything from housing to pensions to annuities to taxes to out-of-pocket health spending--and much more..

The latest installment in this scholarly cottage industry is Economic Preparation for Retirement. It's by RAND think-tank authors Michael Hurd and Susann Rohwedder. Their results are a classic good news/bad news scenario about retirement.

The good news? They found that about 70% of individual's ages 66 to 69 are doing okay financially for retirement. Better yet, 80% of married persons are adequately prepared for retirement.

The bad news? A dismaying 45 percent of the singles aged 66-to-69 year olds they studied face a real risk of running into financial difficulty in retirement. Worse yet, the figure soars to 29% among single women without a high school education.

Here's where I think their story takes an even darker turn. Although the debt ceiling and deficit reduction negotiations in Washington D.C. have hit a nerve-wracking impasse, it does appear that the talks have produced a consensus on reducing Social Security benefits. There is no way to painlessly reduce Social Security and the hit will be especially hard among singles.

We estimate that a reduction in Social Security benefits of 30 percent would reduce the fraction adequately prepared by 7.8 percentage points among married persons and by as much as 10.7 percentage points among single persons.

Ouch. Indeed, while some activist groups, rebelling against expensive federal benefit programs for the elderly, go on and on about a generational showdown, the economy's real fault line is the growing split between well-off households and low-income households.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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