3 Reasons Retirees Struggle Financially


The American Dream once consisted of working the same job for a certain number of years, followed by retirement and then living out your golden years happily ever after.

There was a time when most seniors retired with the financial stability to live out the rest of their lives comfortably. But unfortunately, that dream is becoming less and less attainable for many older Americans.

These are three reasons why retirees find themselves struggling financially these days.

Lack of Savings

One major cause is that the retiree doesn’t have substantial savings to supplement their Social Security benefits. According to a report by the U.S. Government Accountability Office, nearly half of Americans 55 and older have no retirement savings at all.

This statistic shouldn’t come as a huge surprise, given that up to 80% of Americans live paycheck to paycheck, depending on the research cited. Making regular contributions to a 401K can be difficult for people with little extra income.

Disappearing Pensions

Another reason retirees find themselves struggling financially is the rapid disappearance of pensions.

There was a time when employees stayed at a job for many years not only for the steady paycheck, but also the allure of promised retirement income for life, thanks to company-funded pensions.

Although pensions remain relatively common in the public sector, pensions have largely disappeared in the private sector. According to the Bureau of Labor Statistics, in 2017, only 18% of private-sector workers had access to a pension. That number is expected to continue dropping toward zero.

Cost of Healthcare

The high cost of medical care also leads to financial problems for retirees. According to a survey by Bankrate, only 40% of Americans can cover an emergency $1,000 expense.

This leaves little room for error if an unexpected medical expense arises–especially considering that the average U.S. consumer spends more than $10k a year on healthcare.

And it isn’t just those with low income and little savings who are feeling the pain. A study by Harvard University showed that 78% of those who cited medical debt in their bankruptcy filing had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured.

In fact, NerdWallet estimates nearly 10 million adults with year-round health-insurance coverage will still accumulate medical bills that they can’t pay off this year.

Serious illnesses, diseases or injuries can easily result in medical bills that total hundreds of thousands of dollars. This can quickly wipe out savings, retirement accounts and home equity.

For decades, researchers, financial advisors and others have encouraged working Americans to pursue the so-called “three-legged stool” of retirement savings:

  • Social Security
  • A defined benefit pension
  • Individual savings, typically through a defined contribution plan

However, a new report from the National Institute on Retirement Security reveals that 40% of Americans receive income only from Social Security during their senior years.

The American Dream of working hard so you can live comfortably during your golden years isn’t dead. But more and more people are finding that dream harder to attain than ever before.