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Ten thousand Americans a day turn 65, entering a cohort that is growing five times faster than the total population. And with the average 65-year-old today expected to live nearly 20 more years, the U.S. is facing a massive demographic shift that presents important legal questions when it comes to the older working poor whose lifetime wages have been insufficient to allow for retirement savings.

While government and cultural narratives have long exhorted Americans to save more, they ignore the realities of structural systems that prevent low-income people from doing so, including laws that condition access to public benefits on households having virtually no savings to fall back on. This contradiction — between promoting the idea of self-sufficiency and creating barriers to achieving it — must be acknowledged and new policies enacted if the U.S. is to avoid an “elderly poverty epidemic,” says Professor Sara Sternberg Greene, a sociologist and legal scholar who teaches poverty law and consumer bankruptcy at Duke Law School.

“There are people who work full time and still, in order to make ends meet, have to get food stamps so that their kids can eat,” Greene said. “Simply telling them to save isn’t going to cut it, partly because we don’t provide realistic structural opportunities for them to do so.”

A “savings mirage”

As Greene points out in The Savings Mirage, a chapter in the anthology Law and the Hundred-Year Life, the U.S. has for decades shifted the burden of retirement savings to individuals through savings programs like 401(k)s, which have largely replaced defined-benefit plans that guarantee specified payments in retirement.

But Greene argues that this individualized approach to retirement savings, combined with asset limitations for public assistance programs, has made it virtually impossible for struggling households who rely on those benefits to also accumulate savings. If a participant’s “countable resources” such as cash or savings exceeds asset limits, they lose their eligibility for the program. These limits vary widely by program and state but can be as little as $1,000.

“We accept, as a society, that people are earning low enough incomes, even when working full time, that essentially the government must supplement their wages for them to make ends meet,” Greene said. “But when you're on that track, you are not allowed to save in the way that our government and society tells you to when it says, ‘Oh, just save for retirement and then everything will be okay.’”

Greene calls this phenomenon “the savings mirage.”

“There is a general cultural belief in America that it is probably people’s own fault that they do not save. But nobody talks about these asset limitations as a cause of the failure to save,” she said. “We talk big about saving, but our policies say that if someone is getting help from the government because they make an income that is too low to cover their basic expenses like food, shelter and heat, then they are not allowed to save. We don’t acknowledge that there are structures and laws that keep people down and make it impossible for them to save.”

Many of the working poor have trouble saving simply because the federal minimum wage of $7.25 an hour has not been updated since 2009, while the cost of living has risen concurrently. Greene notes that some employees at retailers, and even early-career public school teachers, earn wages so low that despite working full-time, they qualify for public benefits.

And asset limitations for key federal benefits programs such as the Supplemental Nutrition Assistance Program (SNAP, commonly referred to as food stamps), Temporary Assistance for Needy Families (TANF, or “cash welfare”), and Social Security Disability Insurance discourage long-term savings by requiring households to have assets of less than a few thousand dollars, in many cases, to maintain benefits eligibility.

“This antisavings policy … essentially guarantees that those who are poor will continue to be poor and without savings throughout their extended old age,” Greene writes. Already, she notes, almost one in four Americans has less than $400 in savings, and one-third of Black households have zero or negative net worth.

Facilitating savings through legal reform

The savings mirage is one example of a larger phenomenon that Greene developed in an earlier article, A Theory of Poverty: Legal Immobility, in which she highlights the ways that laws hinder upward mobility and perpetuate poverty, especially when more than one law or policy comes into play.

“Laws and policies that, on their face, might not seem problematic can have unintended consequences for individuals and can compound and cascade when many work at once,” Greene said[SG1] .

They include “nuisance” laws such as penalties for repeated 911 calls from the same address that can lead to eviction; occupational licensing laws that vary widely by state and can prevent people from moving for better job opportunities; and driver license suspensions for failure to pay unrelated fines that can lead to longer-term consequences such as job loss. One in seven North Carolinians of driving age have had their licenses suspended over court debt, according to a report by Duke Law’s Wilson Center for Science and Justice, and 28.5% of those surveyed said it had led to eviction.

“In a silo, you could take one thing and say, ‘Well, you know, that's not really all that bad,’” Greene said. “What the legal immobility concept argues is that there are all these small things – policies, particularly at the state and local level – whose cumulative effect works to make it almost impossible for someone to achieve upward mobility.”

By the same token, she says, poverty can be addressed through legal changes that are relatively cost-effective, or even costless, compared to funding new programs. To eliminate the “savings mirage,” Greene offers recommendations of ways laws can be reformed to help low-income Americans save for their futures.

One is loosening or modifying federal asset limitation rules so public assistance recipients can continue to receive benefits while also maintaining and adding to a nest egg for retirement. Another is creating benefits and structures that allow and incentivize low-wage workers to save for retirement, including providing matching or supplemental funds for those whose wages barely cover living expenses.

Greene notes that some progressive proposals to modernize and reform Social Security also would help eliminate elderly poverty; ideas include increasing benefits for people live beyond a specified age, indexing benefits to inflation by age group, and increasing minimum benefits for those with a long work history in low-wage employment.

For such plans to gain traction, Greene says, the U.S. must first abandon long-standing moralistic narratives in the culture that blame people for not saving and penalize them when they do.

“Ultimately, a key problem is that our savings rhetoric largely does not mesh with our law,” Greene says.

“We must pull out of this false narrative that behavioral interventions are the most promising way forward because savings opportunities are available for low-income workers but often squandered. Once we do so there is much that can be done.”