by Alexander Cain
Building a retirement and savings’ nest egg has definitely become a key for many consumers during this holiday season because of fears with the economy and the job market. While unemployment remains high, another key aspect of retirement may also be experiencing a shift. As we begin the holiday shopping season, the country’s deficit is reaching all time highs and many states’ budgets remain in crisis mode.
The government continues to evaluate all alternatives to limit its spending. Social security remains at the top of the list as key government officials try to evaluate the future of social security. As reported in the L.A Times, President Obama’s deficit commission has already developed and proposed many tweaks to the current social security system. If these tweaks are allowed, many within the black community will be facing a harder time qualifying for social security and the anticipated income for many upcoming retirees can have many people re-considering retirement.
The first major move was to again increase the retirement age to qualify for full Social Security benefits. The Social Security Administration has already implemented an increase of the retirement age from age 65 to age 67 effective in 2022. The commission is looking to go even a step further to increasing the retirement age two more years to age 69 in order to receive full Social Security benefits.
While this might seem like a temporary inconvenience with the additional two years of working, this can have a significant effect on the Black community. With the life expectancy of African-Americans around 73.1 according to the Center for Disease Control, those within the black community can only receive full benefits for four years despite contributing to the fund for over a lifetime.
Along with increasing the qualifying age, there will be a reduction in the overall benefit to those who have at earned at least $20,000 a year prior to retirement. This would definitely have a great impact on the 20-somethings who could be facing a thirty to forty percent reduction by the time they actually qualify to receive their benefits package.
Along with reducing it in the future, the commission also plans to shrink its current cost of living adjustment for those currently receiving benefits. This could be disastrous for people who already struggle with living on their benefits now and are facing increasing health insurance and medical care costs. The overhaul could have disastrous effects for old and young alike as Social Security is slowly being eroded away with higher age requirements and lower benefits.
The impact on the Black community becomes very apparent when evaluating these proposals. With a higher qualifying age, African-Americans are less likely to qualify to receive benefits or experience benefits for a shorter period of time. With a reduction of the overall benefit, we need to be more self-sufficient when we hit retirement. The economic downturn has caused unexpected results as the average Americans’ savings rate has increased as more Americans worry about the unforeseen future. As African-Americans, we must improve our financial awareness beyond just reducing spending. We need to become more aware of investment opportunities and divest whatever we don’t spend into retirement, because this trend of benefit reduction will likely continue. With African-Americans having a shorter life expectancy, that means we have to start saving earlier and more than our counterparts to be able to fully enjoy our golden years. As holiday shopping season begins, I hope we can start thinking about the ultimate gift: retirement without significant financial constraints.
