The middle class isn’t poor, but they’re certainly not rich. Turns out, this generation is broker than ever — and many of them are struggling to retire at a reasonable age, let alone at all.
These are six tricks and tools the middle class uses to afford retirement, but they often come at a cost. We’ll also let you know how much you really should have saved for retirement
1. Social Security
It’s hard to make ends meet on Social Security alone. | William Thomas Cain/Getty Images
Social Security checks — often dubbed “welfare for the middle class” — provide monthly stipends to retirees based on their working income. According to The Washington Post, Social Security benefits have lost nearly a third of their purchasing power in the last 18 years.
Almost 20% of retired adults 65 and older rely on Social Security as their sole form of income. Thirty-three percent use it as the majority (90%) of their income, while a staggering 60% rely on it as half their income. The average monthly Social Security benefit for 2017 was $1,342.
Many middle-class adults 65 and older rely on Medicare to cover expensive but common medical services. Medicare will take care of prescription drug purchases, organ transplants, and lab tests. However, it won’t take care of basic vision, hearing, and dental check-ups.
Medicare Part B — which covers the costs of doctor visits and outpatient services — is going to be pricier in 2018 for Americans collecting Social Security checks. Since Social Security automatically pays the Part B premium, Americans were paying around $109 a month for Medicare coverage in 2017. In 2018, around 28$ of Part B enrollees’ Social Security cost-of-living adjustment (COLA) increase won’t be enough to cover the premium.
Medicaid — not Medicare — pays for most of nursing home or home care for the elderly when older adults run out of savings. According to CNN, Medicaid pays for around two-thirds of the 1.4 million elderly currently living in nursing homes. It also covers 20% of all Americans.
While the GOP’s 2017 battle to repeal Obamacare failed, it scared many middle-class Americans. The legislation would have taken an ax to Medicaid — leaving more people than before without government-subsidized insurance.
4. Part-time jobs
In May 2016, 18.8% of Americans 65 and older still held a job. As life-expectancy increases from decade to decade so does the need to save more — as well as the desire to continue giving back to our community. Plenty of Americans choose to continue working for more than just the money. Since you can work and still receive Social Security benefits — although your job earnings may impact how much you receive — many Americans choose to seek the best of both worlds come 65.
Many retirees work seasonal part-time jobs, choose to profit from their hobbies or work in the “gig economy” driving for Uber or Lyft.
5. Mortgage-free by retirement
Most financial planners recommend their clients pay off the mortgage on their house before they retire. The percentage of homeowners of retiring age with mortgage debt increased from 22% to 30% from 2001 to 2011. Homeowners 75 and older with debt skyrocketed from 8.4% to 21.2%.
However, there are still plenty of middle-class Americans finding ways to pay their mortgage off before they lose their regular income. Fifty-four percent of retired Americans were mortgage-free in 2017.
A Washington Post story on the broke middle class revealed a new type of way older Americans are retiring: Buying campers and hitting the road to work as they travel. These “workampers” sell their homes, purchase RVs, and pick up seasonal jobs as they travel the country.
The paper highlighted Amazon’s “CamperForce” program, which “brings together a community of enthusiastic RV’ers who help make the holidays bright for customers of Amazon.com.” The program has campsites in 27 states where retirees spend 3 to 4 of the winter months picking, packing, stowing, and receiving shipments. The program’s benefits include paid campsites, time and a half overtime, life and AD&D insurance as well as medical and prescription drug coverage.
Here’s how much retirement money you should have
An alarming 70% of American adults have less than $1,000 in their savings accounts. Experts have crunched the numbers to identify how much you should have saved at each age milestone for a comfortable retirement.
By age 30, aim to have the equivalent of your annual salary saved. Every five years, increase this in single increments: By 35, you should have twice your annual salary saved and by 40-years-old you should have three times. By 65-years-old this will leave you with a savings equivalent to eight times your annual salary.
The middle class is actually retiring earlier
One in 5 Americans has no savings account and nearly half retire with nothing in the bank. A 2015 U.S. Government Accountability Office report revealed that almost one-third of U.S. households “headed by someone 55 or older” are void of pensions and retirement savings.
About half of America retires by age 65, while 22% retire from 66- to 74-years-old. In 2000, the average age of retirement was 62. As of 2017, it’s 63 — still under the recommended age of 66.