It seems that practically every week you read an article
about a looming retirement crisis in the U.S. That prompts a round of rebuttals
denying that the problem is as large as it's made out to be. So which is it? In
part, that depends on whom you ask, with several distinct camps of researchers
investigating the issue.
First, there are the nonprofit research institutes, whose
main mission is to further our understanding of important societal issues. According
to the Employment Benefit Research Institute's Retirement Readiness
Ratings, 41 to 43 percent of Americans are at risk of running out of money in retirement.
Boston College's Center for Retirement Research has found that 53
percent of Americans are at risk of not being able to sustain their current
standard of living in retirement. A paper from researchers at the RAND
Corporation is slightly less pessimistic, finding that 29 percent of
Americans age 66 to 69 aren't adequately prepared for retirement.
Then there are financial firms that publish their own
measures of retirement readiness. Although readers might correctly assume that
such companies have an incentive to promote the virtues of saving for
retirement, their findings generally jibe with the conclusions of the nonprofit
research institutions mentioned above.
For instance, Fidelity Investments' Retirement
Preparedness Measure found that 55 percent of Americans are in fair or
poor condition when being able to cover essential living expenses in
retirement. AonHewitt's Real Deal study is the most pessimistic,
concluding that only 30 percent of workers at large employers are on track to
retire comfortably at age 65.
What explains the different forecasts of Americans'
retirement readiness? All the measures must make a number of assumptions based
on a variety of key factors, such as age at retirement, the amount of
retirement income needed for a secure retirement, the impact of medical and
long-term care expenses and how Americans deploy their retirement resources. And
obviously people's individual circumstances vary widely, compounding the
difficulty of gauging how prepared the population as a whole is for retirement.
Some experts use the most pessimistic conclusions of these
retirement readiness measures to advocate that our retirement system is broken
and needs radical repair, such as scrapping tax preferences for retirement
savings and enhancing Social Security benefits. Other analysts are most
positive based on the more optimistic projections, arguing that our retirement
system has room for improvement but doesn't need a major overhaul.
What's clear, by contrast, is that Americans are anxious
about their retirement prospects. According to a PBS survey, 92 percent of
respondents think there's a retirement crisis in our country.
For policymakers, it's clear that some portion of the
population is at risk for an adequate retirement. The most optimistic result
from the RAND paper concludes that 29 percent of workers are at risk, while the
most pessimistic result from the AonHewitt study concludes that 70 percent are
at risk.
Employers can do their part to help by helping and enabling
workers to take the actions needed to improve their retirement security. The
government can pass regulations that make employers feel comfortable
to adopt these solutions, and improve workers' confidence in Social Security
and Medicare by addressing their funding challenges.
The bottom line is that whatever the exact scale of this
country's retirement crisis, it will take a concerted effort from workers,
employers and the government to address it.
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