America’s Monumental Retirement DilemmaJames Cordelaine
Back in the day, you could work in America on virtual automatic pilot until retirement. As soon as you reached sixty-five, you could turn off the switch. You’d bid farewell to your supervisor and fellow employees and not look back. You had the supreme confidence your pension, Social Security benefits, and savings could fund a reasonably comfortable retirement.
Retirement in our great nation no longer works that way. Conventional pension plans have given way to 401(k)s. Social Security no longer seems like a sure bet. And only sixteen percent of workers feel certain they’ll have adequate personal savings for retirement. Sixty-one percent of workers have still not been able to shake off the devastating financial effects of the recession.
Employers have been shrewd to shift over the years from traditional pensions, or defined benefit plans, to 401(k)s, or defined contribution plans. The big difference is in a traditional pension plan, the employer assumes any investment risk. In a defined contribution plan, the employee assumes the risk – and the hazards can be significant. Most employees are not equipped by temperament or education to handle such risk.
The TransAmerica Center for Retirement Studies conducts a comprehensive annual survey of workers from diverse age groups. The results of the latest survey are not encouraging.
Forty-five percent of Baby Boomers anticipate a decrease in their standard of living when they retire. A whopping eighty-three percent of Generation X employees believe they’ll be unable to match their parents’ standard of living in retirement. As for Millennials – the youngest age group fully in the work force – only a paltry eighteen percent feel confident about their retirement.
According to the survey, the majority of workers will keep working past age sixty-five. Depending on how you look at it, you can view this as a sorry state of affairs, or you can see it as a sign of America’s robust workforce with a longer life expectancy. My guess, given the survey results, is that it all comes down to money. Under the present system, there’s not enough of it to go around, to support our rising population in retirement. Or as Catherine Collinson, President of the Transamerica Institute and the Transamerica Center for Retirement Studies, observes, “Population aging and increases in longevity are wreaking havoc on long-standing assumptions about retirement and how to fund it.”
Ten years ago, Congress took certain steps through the enactment of the Pension Protection Act (PPA). That legislation provided for a Saver’s Credit, increased retirement plan and IRA contribution limits, and catch-up contributions. But these provisions fell far short of what Americans will actually need for a secure and comfortable retirement.
Ms. Collinson strongly believes Congress and our next president must act together to reform Social Security, provide for more comprehensive savings plans in the workplace, as well as create lifelong learning programs to support people who choose to stay employed. She would also like to see employment laws change to guarantee employees have opportunities to remain longer in the workplace.
While these are estimable goals, they appear to collide with an underfunded Social Security system, the uphill fight of older workers against stress and failing health, and the U.S.’s bootstrap code for employees, as opposed to, say, Europe’s policy to protect workers from being arbitrarily fired.
More power to Ms. Collinson, and her desire to provide Americans with a more secure and dignified retirement! But for those of you for whom retirement is just around the corner, you have precious little time left to hope and pray for legislative changes. Let’s face it, given the figures in the Transamerica Center survey, hardly any of us has time to dilly-dally about retirement.
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Becoming more financially independent is certainly a big piece of the puzzle. One way to do this is to invest in physical gold. Stocks are now deceptively valued because of company buy-backs, and bond yields are atrocious. And these are probably among the biggest assets you have in your pension and 401(k). As these assets decline in a depressed global economy, gold stands to continue its spectacular climb.