Even early 401(k) supporters believe the U.S. retirement funding system is broken

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Slate‘s Helaine Olen summarizes recent articles and research studies to paint a scary view of America’s retirement funding crisis, including a Wall Street Journal piece reporting that early advocates of the 401(k) retirement account are now admitting that it’s doing a lousy job of helping folks save for retirement:

The Wall Street Journal’s Timothy Martin tracked down several early proponents of the 401(k) and asked them what they think of their innovation, which has supplanted the traditional pension at most companies. . . .

Herbert Whitehouse, a former Johnson & Johnson human resources executive who pushed the then-new savings vehicle in the early 1980s, now says even he can’t retire until his mid-70s if he wishes to maintain his standard of living, because, Martin writes, his 401(k) “took a hit” in 2008. He’s 65. And Ted Benna, the man most frequently credited for the 401(k) as we know it, says he doesn’t believe “any system currently in existence” can help most Americans finance their financial needs in retirement.

Olen summarizes recent research studies documenting the depth and breadth of this crisis:

The Center for Retirement Research currently estimates that about 52 percent of households are “at risk of not having enough to maintain their living standards in retirement” with “the outlook for retiring Baby Boomers and Generation Xers far less sanguine than for current retirees.” The Economic Policy Institute says just under half of households headed by someone between the ages of 32 and 61 have nothing saved for retirement.

Cassandra Calling

In a Slate piece from last March, Olen reveals her exasperation in writing over and again about a retirement funding crisis that America is sweeping under the rug:

News flash: Americans still aren’t saving enough money for retirement.

No doubt you are tired of reading this story. I’m certainly tired of writing it.

“The United States is on the verge of a retirement crisis,” I proclaimed in 2013. I repeated myself in 2014. And again in 2015. And, now, 2016.

I can relate. On a much more modest level (in terms of readership, that is!), I’ve been sounding this call for many years on this blog:

Two tales of the Times (2016)

Two articles published in last Saturday’s New York Times drive home a pair of contrasting narratives about aging and retirement prospects in the United States. One paints an idyllic picture of retirees who have the flexibility and financial resources to engage in adult learning activities for pleasure and intellectual company. The other details the challenges facing women who became unemployed in their 50s during the Great Recession and who have struggled to find work since then.

Is America “On the Beach” about its retirement funding crisis? (2015)

Is America simply waiting for the huge, coming crisis in retirement funding to overtake us? What happens then?

The situation reminds me of the 1959 movie, On the Beach, starring Gregory Peck and Ava Gardner. In the film, Australians are attempting to carry on with their everyday lives, while knowing that massive, deadly nuclear fallout, which already has wiped out most of the rest of humanity, is heading their way. When that occurs, they, too, will have no hope for survival.

Hard looks at joblessness, retirement funding, and Generation Jones (2014)

Many members of “Generation Jones,” that span of late Boomers and early Gen Xers who are in their middle years, face tough times right now. This cohort has been hit especially hard by the ongoing economic crisis, with many losing jobs in mid-career and finding it difficult to obtain new employment and to save for retirement.

The three-pronged political attack on the very notion of retirement (except for a few) (2013) 

In America, the very notion of a relatively safe and secure retirement is under relentless attack, and much of this broadside is coming from well-monied corporate interests, aided by supportive far-right politicians.

This is not by accident. Only when you connect the dots do you see a unifying force, and it’s very, very political. We haven’t been comprehending how the pieces come together because, frankly, concerns about America’s retirement funding crisis tend to be examined in silos, such as (1) Social Security; (2) public employee pension funds; and (3) 401(k) balances.

Retirement expert: “Most Americans will become poor or near-poor retirees” (2012)

According to economist Teresa Ghilarducci, one of the nation’s leading experts on retirement policy, “(i)t looks like most middle-class Americans will become poor or near-poor retirees,” adding that “(t)he baby boomers will be the first generation that will do worse in retirement than their parents.”

When Boomers retire (or try to): America’s coming train wreck (2010)

Do I have it completely wrong, or is most of America ignoring the coming economic and social train wreck that will occur when millions of Baby Boomers realize they do not have sufficient resources to fund a relatively comfortable retirement?

I’ve been trying to connect the dots, and the emerging picture of the Boomer retirement crisis frightens me….

In her March Slate piece, Olen urged the presidential candidates to make the nation’s retirement readiness a major campaign issue. Instead, we got the ugliest, most vulgar campaign in modern American history. I don’t know what it will take for the nation to wake up to what is before us, as millions of Boomers (followed closely by Gen Xers) move into their later years. Even the relatively quick-fix responses, such as raising the payroll tax limit to allow Social Security to maintain current benefit levels and — hopefully — to increase benefits for those in need, do not appear to have a lot of political support in Washington D.C.

One response

  1. Thanks for bringing this to everyone’s attention David.
    Today’s employees have a right to good management. But this seems elusive and what many get , David Yamada has well documented.
    There are a few great books that illustrate and can offer a better way to build savings than the 401b plan and free you from relying on poor financial management of your company:
    1The Bank on Yourself Revolution by Pamela Yellen
    2 Confessions of a CPA by Bryan Bloom
    3. Live Your Life Insurance by Kim Butler
    All of Kim’s books are a follow up to this initial book.
    A great post by David. Unfortunately, things will get worse for young middle class people. Hope reading about these new strategies help you take control of your own financial future.

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