April 7-11 marks the annual event known as America Saves Week, which began in 2007 as a “an annual opportunity to encourage all Americans to save and a chance for individuals and families to take stock of their financial health and preparedness.”
This reflects an entrenched cultural, moral and political belief that it is possible to retire with abundant savings — you just have to learn how to be strategic, budget wisely, save diligently and invest prudently. The reality, however, is that retirement savings are an insurmountable aspiration for many Americans, particularly low-wage workers. Indeed, almost one in four Americans has less than $400 in savings. One-third of Black households have zero or negative net worth. But the government’s response to this overall lack of savings has been to emphasize the need for individuals to save, and the United States’ retirement policy initiatives have largely focused primarily on consumer financial education and nudging people to save more.
At the same time, we are in the midst of a profound demographic shift, as increased lifespans see more and more Americans reaching the age of 100. In this era defined by an increased longevity, the narrative of personal responsibility is no longer enough. The government does not provide a solid financial foundation for older Americans who were making poverty- and near-poverty-level wages during their pre-retirement years, yet the government also does not allow those making low wages to build a nest egg for retirement.
Despite the emphasis on saving for retirement, older Americans whose incomes are at the low end of the income distribution are increasingly worse off than their higher-income counterparts. They enter old age with little or no savings, medical problems without adequate coverage, a necessity to work in order to eat and have a place to live, and, unsurprisingly, increasing rates of bankruptcy filings. One study found that roughly one in three older Americans is economically insecure, living at or below 200% of the Federal Poverty Level. The data for older Black and Latinx Americans is even worse, with half living at or below 200% of the poverty line. Another study found that 49% of older workers and their spouses will experience downward mobility in retirement.
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Without a drastic reimagining of our systems, a poverty crisis looms.
The history of responsibility for older Americans is an evolving one. Life was short in the mid-1800s, with the life expectancy of most white Americans only 39 years. Older adults were generally considered a “burden on the local taxes,” and many were either sent to poorhouses or auctioned off as farm labor.
After the Great Depression, life expectancies increased alongside the percentage of older Americans living in poverty — by 1935, 50% of older adults were poor, and by 1940, almost two-thirds were poor. These staggering numbers, along with the realities of the Great Depression, led to President Franklin D. Roosevelt signing the Social Security Act of 1935 into law. This was the beginning of a significant shift — government began investing in the economic security of older adults.
In 1965, Lyndon B. Johnson’s administration built on the achievements of the Roosevelt era by enacting Medicare and Medicaid. At the same time, following World War II, employers began to expand retirement benefits for their full-time employees, providing them with defined-benefit pensions and other important benefits for old age.
In the late 1970s and early 1980s, however, the concepts of individualism and self-sufficiency began to pervade U.S. culture and politics. A weakening of the safety net for Americans, including older Americans, followed. Employers began to replace mandatory pension plans with optional higher-risk 401(k) plans that do not guarantee a certain income during retirement. Social security payments were reduced, and many more jobs did not provide any avenue for retirement savings.
In response to increased longevity, government emphasized with increasing urgency the expectation that Americans must save for their own retirements. In 2000, then-Treasury Secretary Lawrence Summers gave remarks focusing on the need for Americans to save more. He said that it was critical not only “to our economic health” but also for families, “because it influences their capacity to manage what is new in the New Economy: not least, the fact that people are living much longer than before.”
In 2015, the Treasury Department released a treasury note entitled “Helping More Americans Save,” in part to mark America Saves Week. The notice, released by J. Mark Iwry, then senior adviser to the Secretary of Treasury for Retirement and Health Policy and the Deputy Assistant Secretary for Tax Policy, noted that the Treasury Department was “ensuring that more Americans have the knowledge and tools to manage money and credit responsibility because educated and financially capable consumers can better attain their own financial goals and contribute to the strength of our overall country.”
In response to increased longevity, government emphasized with increasing urgency the expectation that Americans must save for their own retirements
The idea is fairly simple: Some Americans are not financially educated and need help “learning” how to save, so the government will do the work to improve “habits,” as Secretary Summers put it. There was little discussion of the structural conditions that make it difficult for Americans to save.
Existing research shows that low-income Americans have adopted this ethic and in fact desperately want to save — they even work the existing savings-unfriendly systems to try to force themselves to save. However, their efforts are often in vain, in part because of the underappreciated aspects of our laws and policies that make it almost impossible for the working poor to save.
Wage stagnation and rising expenses are significant factors. A 2019 study found that 53 million Americans, accounting for 44% of American workers between the ages of 18 and 64, qualify as “low-wage” earners. The median hourly wage of those low-wage workers was $10.22, with median annual earnings of about $18,000. Further, over half of low-wage earners were either the only workers in their family or live in families where all workers were low wage. While wages went up a bit in the midst of the pandemic, a recent study found that in 2024 more than 39 million workers, or almost a quarter of the labor force, made less than $17 per hour. Numerous studies and reports confirm that large companies pay their workers such low wages that these workers need public assistance, even when working full time.
Even at times when low-wage workers have the opportunity to save — when perhaps they receive an unexpectedly large tax return, when they are given extra hours at work, when they receive a stimulus payment/credit or when they sell a prized possession for cash — our poverty laws often prevent them from accumulating any meaningful savings. This happens through asset limitation laws that control many of the major public assistance/antipoverty program (outside of the tax system) that provide money or money-like relief to low-income Americans such as the Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families and Social Security Disability Insurance.
These limitations impose rigid restrictions on the amount of cash and assets aid recipients can accumulate. Thus, recipients are in a bind. If they attempt to put away meaningful savings when they receive a lump sum in the form of, for instance, a stimulus check or tax credit, they cannot continue to access the programs they need to survive month to month.
Before Ronald Reagan was elected, states set welfare programs’ eligibility requirements. Reagan, however, campaigned in the early 1980s on a promise to reform welfare, and he was able to push through asset restrictions on major welfare programs which largely remain in place today (though states have regained some control).
Reagan did this via the Omnibus Reconciliation Act of 1981, which set asset limits at $1,000 for most welfare programs, a large decrease compared to then-existing state limits. A study conducted 10 years after Reagan left office showed that low-income single mothers reduced their personal savings by an average of $1,250 after this federal asset limitation was imposed.
Even at times when low-wage workers have the opportunity to save, our poverty laws often prevent them from accumulating any meaningful savings
In the mid-1990s, Bill Clinton ran for president on a campaign promise to reform cash welfare (then Aid to Families with Dependent Children) into a program that would promote “personal responsibility” and “economic self-sufficiency.” Welfare reform was passed following Clinton’s election, transforming AFDC into TANF, stripping away the existing safety net for families and turning welfare into a bare-bones program with much state control. Further restrictions for eligibility were put on cash welfare, such as more work requirements and a 5-year lifetime limit. States regained control over setting asset limits as part of these changes, but only some exercised this authority.
Asset limitations help ensure that the poor remain poor. Indeed, studies have shown that asset limits create disincentives for low-income families to save. Multiple studies have confirmed that families save more when asset limitations are lower or nonexistent, and save less when asset limits are instituted.
So where does this leave us? Fortunately, there are several promising ideas moving forward: For one, the government could establish government-sponsored universal retirement accounts and implement automatic enrollment paired with matching contributions, particularly tailored for low-income earners. We could also work on strengthening public benefit programs by eliminating or restructuring asset limitations so that low-income workers can save without the constant fear of losing essential benefits, and by expanding Social Security for the lowest-income workers so they would no longer have to rely on a patchwork of inadequate private savings options.
To achieve some of these much-needed reforms, we must shift the cultural narrative — peeling back the moralistic and judgment-laced rhetoric around poverty, savings and retirement — and acknowledge existing structural barriers to savings. As a poverty epidemic looms, we cannot afford failure.
Adapted from "Law and the 100-Year Life: Transforming Our Institutions for a Longer Lifespan" by Anne L. Alstott, Abbe R. Gluck and Eugene Rusyn. Copyright Cambridge University Press © 2025. All rights reserved.
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