There have been whisperings of a Grand Bargain to be enacted during the lame duck session after the 2012 election, all which which involve slashing public retirement benefits (that is, Social Security and Medicare). This is a disaster-in-waiting as many future retirees are going to be dependent on those programs–and there are no guarantees they’ll be able to ‘cash in’ their houses either:
It should be apparent that housing is not a safe asset, even when we are not in a bubble. Those who advocate that everyone should be a homeowner are displaying their ignorance. Homeownership in many markets can be like putting all your savings in your employer’s stock. Ask an autoworker in Detroit if this is not clear.
Another important take away from this survey is that older workers are extremely ill-prepared for retirement. The median wealth for families between the ages of 55-64 is $179,400. For families between the ages of 45-54 it is just $117,900.
This sum includes everything they own. That means all their savings, their retirement accounts and the equity they have in their home. This means that the typical retiree in the next two decades will be almost entirely dependent on their Social Security check. Remarkably, in Washington all the important people think the most pressing matter is finding ways to cut Social Security and Medicare.
This might also be thought of as a Very Serious Long Term Problem, although if you’re a Very Serious Person, you probably won’t have to worry about it.