Wealthier Retired Individuals than Wealthiest Living Persons: Analysis by François Lenglet
As the debate on tax deductions for retirees heats up, TF1's economics whiz, François Lenglet, shares his two cents. Lenglet contends that working folks aren't any less well-off than pensioners. Instead, he argues, the "real divide" lies in inheritances.
The government's 2026 budget is on the horizon, and the tax deduction that retirees currently enjoy might be axed. Budget discussions will take place in the fall, with the primary orientations revealed around July 14. The debate on retiree tax deductions has sparked renewed discussions about their overall financial status. Some argue that retirees usually have a more significant financial cushion than working folk. But is this truly the case?
In his May 5 analysis, Lenglet asserts that the 2024 data from the Pension Advisory Council shows that the average monthly income of an elderly household is approximately €2,700, while that of an employed family is €3,630. Yet, critics of the senior tax argue against these numbers due to two key points.
Firstly, many retirees are homeowners, which exempts them from rent. Secondly, their household expenses, sans children, are relatively lower. These factors confirm that the lifestyle of retirees comes with a premium of 1.8%. However, Lenglet thinks this calculation is questionable. He deems it absurd to penalize seniors because they've managed to secure their homes.
Moreover, the pace of pension evolution has been sluggish, with an average growth rate of just 0.17% per year between 2014 and 2020, largely due to de-indexation and an increase in the special retirement CSG. Lenglet, however, points out a "real inequality": inheritance. With increased life expectancy, inheritance is now more likely to pass from senior citizens to retirees rather than serving young couples to establish their lives. Should we then tax inheritances more? Lenglet predicts that the debate will persist, as retirees tend to cast more votes than others and are therefore favored.
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Keywords: taxation, retirement pension, budget, taxes
Enrichment Data:- Retirement Savings: Many retirees lack sufficient savings to support their expenses, with the median 401(k) balance for those 65 and older being $88,488.- Social Security: While Social Security provides an essential income source, the average monthly benefit is around $1,980, often insufficient to cover expenses.- Inflation and Cost of Living: Inflation and cost of living concerns continue to impact retirees' financial security.- "Magic Number" for Retirement: The estimated amount required to retire comfortably is $1.26 million, which may exceed actual savings.
- As the 2026 budget approaches, the potential elimination of tax deductions for retirees has spurred discussions, raising questions about their financial status compared to working individuals.
- In his analysis, François Lenglet, a renowned expert on personal finance and business economics, argues that the difference between retirees and working individuals might not be as significant as perceived, due to factors such as home ownership and lower household expenses, suggesting a need to reevaluate the taxation of retirees and inheritances.
