Neal Gabler is a successful writer whose personal account of sliding down the economic ladder due to career ups and downs, kids’ college costs, and questionable spending decisions has gone viral. Published in the current issue of The Atlantic, Gabler’s tale of being in the heart of midlife with precarious personal finances and dubious retirement prospects has struck a chord.
Before jumping into his own story, Gabler shares facts and figures that should give all of us a chill, including a recent Federal Reserve Board survey of American consumers, which included a question about how respondents would cover an unexpected $400 expense:
The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?
Gabler counts himself among those who would have trouble scrounging up $400. He makes clear that he’s not blaming the world for his situation; in fact, he takes responsibility for his actions and decisions:
I don’t ask for or expect any sympathy. I am responsible for my quagmire—no one else. I didn’t get gulled into overextending myself by unscrupulous credit merchants. Basically, I screwed up, royally. I lived beyond my means, primarily because my means kept dwindling. I didn’t take the actions I should have taken, like selling my house and downsizing, though selling might not have covered what I owed on my mortgage.
It’s a thought provoking and sometimes disturbing piece about middle class anxieties, pressures to keep up with the Joneses, and how quickly both time and money pass through our lives.
Lingering effects of the Great Recession
Gabler may not be blaming his personal finance woes on our economic system, but plenty of evidence suggests that most Americans are subject to the slings and arrows of an unforgiving market economy and significant wealth inequalities.
Nicholas Fitz, writing for Scientific American, documents our misconceptions about wealth and income distribution in the U.S.:
The average American believes that the richest fifth own 59% of the wealth and that the bottom 40% own 9%. The reality is strikingly different. The top 20% of US households own more than 84% of the wealth, and the bottom 40% combine for a paltry 0.3%.
. . . The median American estimated that the CEO-to-worker pay-ratio was 30-to-1, and that ideally, it’d be 7-to-1. The reality? 354-to-1. Fifty years ago, it was 20-to-1.
Ben Leubsdorf, in a piece for the Wall Street Journal, writes about the lasting economic and psychological trauma of the Great Recession:
The recession ended seven years ago, but persistent joblessness and underemployment marred the economic expansion that followed. A growing body of research suggests the economic trauma has left financial and psychic scars on many Americans, and that those marks are likely to endure for decades.
About one in six U.S. workers became unemployed during the recession years of 2007, 2008 and 2009. Today, nearly 14 million people are still searching for a job or stuck in part-time jobs because they can’t find full-time work.
Even for the millions of Americans back at work, the effects of losing a job will linger, the research suggests. They will earn less for years to come. They will be less likely to own a home. Many will struggle with psychological problems. Their children will perform worse in school and may earn less in their own jobs.
Labor economist Teresa Ghilarducci (New School for Social Research) is one of the nation’s leading experts on retirement funding. Though most of her work is contained in academic articles and studies, she has recently authored a slim 116-page book, How to Retire with Enough Money: And How to Know What Enough Is (2015), which I highly recommend. Two years ago, Dr. Ghilarducci told The Week (subscription may be necessary) that “This is the first time that Americans are going to be relatively worse off than their parents or grandparents in old age.” Figures cited in the article back her up:
A stunning 45 percent of all American households with people still in their working years have nothing at all saved for retirement. Among those ages 50 to 64, 75 percent have less than $28,000 put away. Even among the most prepared Boomer households, savings average just $140,000, far too little to fund a 20-plus-year retirement. All told, Americans are at least $6.8 trillion short of what they need for a comfortable retirement, according to the National Institute on Retirement Security.
In her book, Ghilarducci avoids pointing the finger at individuals for alleged overspending or failure to save. Rather, stagnant incomes and a sharp decline in employer-sponsored pension and retirement plans are among the major culprits. She urges readers to undertake both personal and political action to improve America’s retirement security prospects.
My conclusion? We’re facing a major reckoning on a national and global levels when it comes to economic issues big and small. I concur with Dr. Ghilarducci that the responses will have to be both personal and political.