Do WE’VE A Retirement Crisis?

Do WE’VE A Retirement Crisis?

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Do WE’VE A Retirement Crisis? Of Course We Do. Do we’ve retirement crisis in the US? Showing my age group and with apologies to Messrs. Martin and Rowan, you wager your sugary happy we do. Despite all the pundits citing data and informing us that people don’t possess that problem, I’m telling you we do. I used to be inspired to write this by an excellent piece that I read in Investment News this morning. The theme was that Vanguard’s data demonstrates the average combined cost savings rate (employee plus employer) has increased since 2004 from 10.4% of pay to 10.6% of pay.

To understand this better, let’s look at what else has happened during this time period. The Pension Protection Act (PPA) of 2006 became regulation. Many defined advantage (DB) pension plans were iced and or terminated. The brand new in vogue terms in the 401(k) world all abruptly started with auto: auto-enrollment, auto-escalation, auto-pilot.

At once, the new dread became that of outliving your savings. That’s right, people longer are living. People know that people longer are living. This frightens many. From a pension perspective, they don’t learn how to offer with this. Why should I say that? What’s incorrect with the evaluation from pundits? Suppose I told you that 55% of Americans are “on the right track to stop working,” whatever that means (every recordkeeping firm who generates data like that has their own basis for what that does indicate).

Is that good news or bad information? Most who believe that the 401(k) -only system is really as near to nirvana as you can get would tell you it’s great news. They say etc social media. They go out of their way to bash those who disagree. Well, I disagree and is why here. I’ll reword what they are saying taking what they state as factual.

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Suppose I told you that 45% of Americans are not on track to stop working. How can you react to that? My intuition says that you would think that is an awful thing. Yet, it is strictly a similar thing as 55% of Americans being on track to retire. Further, the data being utilized often assumes that Americans will need their 401(k) amounts and draw them down ratably and prudently.

Which Americans are those? They’re not the Americans of 2019. They’re not the ones who want the latest device. They’re not those that love their Amazon Prime accounts. They’re not the ones from the moment gratification world of today. For some Americans, being able to guarantee a level of lifetime income protection is of almost paramount importance. It’s not easy in a 401(k) world.