Americas Retirement System Is Broken This Economist Is Trying To Fix It
The three-legged stool of American retirement – Social Security, employer pensions, personal savings – that stool has been wobbling for decades now. At this point its basically just teetering on Social Security while the other two legs rot away. Some economists are finally saying what we all suspected: whole thing needs rebuilding from scratch.
Traditional pensions basically vanished from private sector. Less than 15 percent of workers have access to defined benefit plans today. Down from about 40 percent in the 80s. Companies shifted all the risk to workers through 401ks and workers… largely failed to save enough or invest wisely.
The Retirement Savings Crisis Numbers
Numbers are genuinely scary. About half of working-age households have ZERO financial struggles like retirement savings. Nothing. The median 401k balance for folks approaching retirement is around $70,000. Sounds okayish until you realize that generates maybe $300 a month in sustainable income.
Social Security provides average benefit of roughly $1,500 monthly. Combined with minimal personal savings thats poverty for many retirees. Medicare helps with healthcare but doesnt cover everything. Long-term care can wipe out whatever savings exist.
Proposed Solutions
Economists have floated various fixes. Automatic enrollment in employer plans with opt-out instead of opt-in dramatically increases participation. Higher default contribution rates capture more savings while people are earning.
Some want government-sponsored individual retirement accounts for workers without employer plans. Others push for expanding Social Security benefits while raising payroll tax cap to make math work.
More radical stuff includes mandatory savings programs modeled on Australias superannuation system. Employers must contribute percentage of wages to retirement accounts for every worker. Just… required.
Political Reality Check
Any major retirement reform requires political will thats been notably absent. Social Security is third rail of American politics – touch it and you die politically. Raising taxes is anathema to one party. Expanding government programs is anathema to the other.
Meanwhile millions of Americans are careening toward retirement with not nearly enough. Theyll rely on family if available, work until they physically cant, or face severe poverty in old age. The math is straightforward. The political will isnt. Economists can propose solutions all day. Actually getting them done is another matter.
