Reason No. 5,918 for a 401k (and HSA!)

401k, retirement, poverty, seniors

Maybe go ahead and up that deferral rate.

For 401k sponsors and participants in need of a wake-up call, here’s a disturbing tidbit plan advisors might consider relaying: more than 7 million seniors lived in poverty in 2017.

“Payments from Social Security and Supplemental Security Income have played a critical role in enhancing economic security and reducing poverty rates among people ages 65 and older. Yet many older adults have limited income and modest savings,” the Kaiser Family Foundation (KFF) noted in a brief on Monday.

Within its summary, KFF analyzed data from the U.S. Census Bureau, which reports on two separate measures of poverty. Individuals 65 and older with an income below $11,756 are classified as living in poverty under the first, called the “official measure.”

The unofficial gauge, dubbed the “Supplemental Poverty Measure” (SPM), takes into consideration people’s region, homeownership status, monetary resources, financial liabilities, taxes and benefits (like food stamps), as well as medical spending.

Poverty estimates based on the SPM are higher than the official measure “largely due to the fact that the SPM deducts out-of-pocket medical expenses from income,” KFF explained.

Key findings of the analysis include:

“In 2016, half of all people on Medicare had income less than $26,200 per person. This analysis provides current data…as context for understanding the implications of potential changes to federal and state programs that help to bolster financial security among older adults,” KFF concluded.

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