Last week I spent several hours doing some pro bono troubleshooting for a 78-year-old woman who couldn’t afford her rent and was facing eviction. Her story is not that much different than many similar calls I’ve received across the years. Her call coming in conjunction with the week of dialogue and discussion with my fellow retirement policy wonks was timely and informative.
Her reality shared by millions of hardworking retirees and veterans drives home that Americans must become more discriminating in our discussion about people that “need” help. We also must abandon the myths underlying our U.S. retirement policies that assume most Americans can expect financial security when stopping working at some “normal” retirement age well as current proposals that suggest that retirees would be more financially secure if we force or encourage retirees to annuitize their 401k accounts at retirement.
As usual, I have no idea how she found me.
This woman was a retired pharmaceutical sales person. She earned a six-figure income for most of her adult life. She contributed the maximum amount permitted to her company’s qualified retirement plans every year. She bought and paid off a home. She did everything “right” based on the currently promoted strategy for retirement security.
Her current entire monthly income comes from her Social Security check and the approximately $500 a month that she earns from a part-time jobs as a receptionist at a health club 30 minutes away from her home. This is the only job she’s been able to get.
She is educated and saved her whole life. However, her entire retirement savings were eaten up before her 70th birthday by uncovered medical expenses for her deceased husband and later, her only son who died from cancer about five years ago. Her son had health insurance as long as he could work, but his illness prevented him from continuing. He didn’t qualify for Meficare, Medicaid or other relief and those coverages really didn’t cover his medical expenses for home care, hospice and many treatments. He was her only son. What was she to do?
She sold her home in hopes of downsizing and used the proceeds to help pay his medical bills and other expenses. Unfortunately, it turned out she couldn’t afford to buy something smaller and more affordable because housing inflation had caused those tiny, downsized homes to require a monthly payment more expensive than the one that she sold.
Her current rent is $1400 a month. That sounds like a lot of money, but that’s the going rate for a one bedroom apartment in Plano, Texas, right now. At least that’s the going rate if you’re 78 years old and worked your entire life. Apparently her landlord has a promotion going for young people where they waive the first month’s rent, deposit, and provide a special rate to recent graduates.
She apologetically explained to me that she tries her best to economize. She doesn’t have Internet, shops markdowns at the grocery store, hasn’t bought any new clothes in 10 years, and her social life consists of going to church and sitting with her dying friends as a caregiver.
By the time she pays for her Medicare supplement and part D coverage premiums, utilities, and other fixed costs of real necessities, she has approximately $500 a month to buy her groceries and other necessaries. She’s never had a cup of coffee at Starbucks.
She was clearly embarrassed to have to ask for help. She expressed her frustration that she was willing to work, but no one would hire her. She has a college degree, is extremely literate, articulate, organized and capable. She doesn’t sound or look 78 years old. Still, after applying for literally hundreds call-center, medical office, receptionist, and other jobs well below her education and experience, she has only been able to drum up the current part-time, $12 per hour health club receptionist job.
She had received an eviction notice from her landlord. She got behind on her rent because her 15 year-old car needed repairs. She paid her rent late and paid an extra several hundred dollars and penalties. She was about caught up but was going to incur another several hundred dollars in late fees and penalties because her rent was going to be late again this month. She would have just enough to cover the rent on Wednesday when her Social Security payment gets deposited. Unfortunately, she hast to pay her rent by Monday to avoid the penalties for late payment. The landlord that charges her more than the young people that he’s inducing with his move-in promotions has already delivered the notice of commencement of an eviction proceedings.
She told me if she could just make that catch-up payment she would be “OK.” I told her that wasn’t true. She would just have this crisis resolved until the next time she has an uncovered medical bill, car repair, or some other foreseeable expense that doesn’t fit within her budget.
I checked around to see if I could find her any help. She does not qualify for rent assistance because she has too much monthly income. All she has is Social Security and the extra $500 she earns from her part-time job. Her retirement savings already are wiped out by family medical expenses. God help her if she loses that job because she relies on that for her food budget. She’s just one small unexpected expense from homelessness as long as she can stay employed.
It may sound counterintuitive, but annuitization has not worked to the benefit of many of the formerly middle-class retirees that I’ve helped across the years. Whether their retirement financial security depended on 401(k) savings, pensions earned during the retirement, or both, after a few years, the reality is always the same. Their Social Security and annuities provide them with a fixed monthly income, that doesn’t keep up with their expenses after the first few years. When this happens, annuitization becomes a devastating disadvantage since financial assistance almost always is determined based on current taxable income. The inadequate but guaranteed monthly income from their retirement savings and Social Security disqualifies them for Medicaid and virtually all other need-based medical, rent, food stamps, debt forgiveness and all sorts of other relief that they could’ve qualified for if they had simply rolled over their accounts, irresponsibly spent their retirement savings, or never worked or saved at all.
The reality is, it’s not whether you annuitize or invest your retirement savings when you retire: Virtually no American realistically has the ability to save enough to reliably meet their full retirement financial security needs across their expected lifetime unless they are extremely lucky with their and their families health and other circumstances, die sooner rather than later, or both.
The experience of our aging and disabled veterans is the same.
It’s tragic that our veterans, elderly, and others that are responsible literally face homelessness with no help while Americans provide hotel rooms and free food to individuals who entered our company illegally carrying their iPhones before they’ve ever paid a single dollar of taxes, forgiving student loans for people who drank Starbucks and had a good time in college instead of working, and are preparing to make downsizing even less affordable for retirees by offering $25,000 down payments that will drive up the cost of smaller, less expensive entry and downsizing homes to people carrying iPhones and wearing designer tennis shoes who can’t save enough money for a down payment and who will probably ultimately default like many past recipients of similar first-time home buyer “help” ” did the last time the United States sponsored similar giveaway programs.
The sad reality is that homelessness is just one minor financial crisis away for most hardworking retirees and many middle-class working Americans.
Any parent knows that “need” is a relative thing. American taxpayers, voters and policy makers must be much more discriminating in defining who has the “needs” that we should use taxpayer money to address.
Americans and American policymakers must stop assuming that those who earn and save owe anything to those who don’t. American policy needs to stop treating the less industrious as more needy and deserving than those who earn.
“Progressive” property, income and estate taxes that make the hard working pay for “help” for the less industrious or productive doesn’t elevate the need of the less productive; it just converts the productive into the needy and incentivizes the underproductive to remain or become less productive.
We must end the policies that condemn our hardworking, responsible retired veterans and retirees to spending the final decades of their lives in quiet financial desperation while subsidizing the never-ending “needs” of the irresponsible and unproductive.
When flawed American policy punishes hard working veterans and retirees into poverty, we must abandon the policy of treating those retired and disabled producers as less deserving of help than others who have worked and contributed less.