When it comes to seniors’ economic security, America is in poor shape. This October, an annual assessment of pension systems worldwide gave the United States a barely passable C+, ranking the country’s retirement security apparatus below Kazakhstan and just a slight notch above Colombia, two far poorer nations. How can this be?
Similar to previous years, the Mercer/CFA Institute Global Pension Index found the U.S. system is marred by low benefits, conflicts of interest and anemic financing. No wonder elder poverty in this country ranks the highest among the G-7 nations at a drearily elevated 23.1%, while other rich OECD nations have senior poverty rates under 10%.
And senior poverty in America is getting worse. Due to eroding Social Security, failing 401(k)s and soaring medical costs, the poverty rate for U.S. seniors aged 65 and over rose between 2020 and 2022.
Elders are not alone in their deprivation. Poverty among U.S. children is also shamefully high at 21.3%.
While elder poverty actually eclipses that of children, the “Greedy Geezer” myth—the false notion that seniors’ needs are raiding the nation’s piggy bank for kids—refuses to go away. But in fact, there is no empirical evidence that pension systems transfer funds from the young to the old. Taking a dollar from the old does not mean the nation will give it to kids. Politics doesn’t work that way.
When nations support vulnerable populations, both elders and children do better. Economist Axel Boersch-Supan examined 16 countries and found that a nation’s generosity toward the elderly does not reduce the share of total social expenditures for programs targeting youth. Similarly, a group of American economists found that young people have higher returns on their taxes than older cohorts when comparing U.S. education spending to Social Security and Medicare.
Research by this article’s lead author revealed that, across at least 63 countries, spending for the young and old coincided rather than contradicted. To put it in numbers, a 10% increase in spending on education is correlated with a 7.3% increase in spending on pensions.
There is no “economic war of the generations,” as some claim. As both senior and child poverty stay stubbornly high in America, the solution is clear: When one group is politically attacked, coalitions must rise up to defend both generations and their common fate.
To tackle child poverty, a few policies will go a long way: The child tax credit, earned income tax credit and Social Security are critical to helping poor kids and families escape impoverishment.
For America’s seniors, we must boost Social Security’s revenues and raise the minimum benefit. All workers need and deserve retirement protections. America’s do-it-yourself retirement system, dominated by voluntary pension plans and eroding Social Security, works best for those at the top, while leaving tens of millions of elders out in the cold.
Seventy-seven percent of the over $279 billion in retirement tax breaks go to the wealthiest 20% of Americans, according to an Economic Innovation Group report. What’s more, only the top 10% of Americans have enjoyed wealth increases over the last 40 years.
Cutting Social Security only deepens these economic chasms. Instead, with targeted tax increases on the wealthiest Americans, we can sustain and expand Social Security and Medicare, keeping the hounds of elder poverty at bay. Tax breaks for retirement accounts should go to ordinary workers, for example by passing the newly introduced, bipartisan Retirement Savings for Americans Act.
(Teresa Ghilarducci is professor of economics at the New School for Social Research and director of the Schwartz Center for Economic Policy Analysis. Christopher D. Cook is Senior Writer for The New School.)
