Ever just sat and stared at the National Debt Clock? I have. I’ve sat in awe watching our national debt jump by thousands literally each time I blink, and surge by the million in the time it takes me to make a sandwich. I find it frightening, but fascinating at the same time.
The retirement debt clock, on the other hand — wound and set last week at an event by Retirement USA at the launch of “Wake Up, Washington!” Month — I find only frightening.
The national retirement income deficit, the gap between the pensions and retirement savings that American households have today and what they should have today to maintain their living standards in retirement, stands at $6.6 trillion and counting, Retirement USA concludes.
The organization notes that the number — already eye-popping — is a conservative estimate.
The retirement income deficit, based on projections of retirement income and wealth for American workers ages 32-64, was calculated for Retirement USA by the Center for Retirement Research at Boston College, using methodology developed for the Center’s National Retirement Risk Index.
“The key sources of income that retirees have relied on are either under attack — in the case of Social Security — or disappearing — in the case of traditional pensions,” Ross Eisenbrey, vice president of the Economic Policy Institute, said at the “Wake Up, Washington!” Month kick-off event. “Wake Up, Washington!” Month, a speak-out on retirement security, runs from September 15 to October 15.
“401(k) plans are not working, and millions of workers have neither a pension nor a 401(k) account. Clearly, the current private retirement system is failing most Americans,” Eisenbrey added.
"While policymakers talk about budget deficits, there is a massive and growing retirement income deficit that has largely been ignored by Washington," said Karen Friedman, executive vice president and policy director of the Pension Rights Center.
Well, speaking of Washington, right about the time Retirement USA yelling at policymakers to wake up, the Departments of Labor and Treasury also last week held a joint hearing to examine the goal of lifetime income for employer-sponsored retirement plans.
Among those testifying was Bob Collie, Russell Investments’ managing director of investment strategy and consulting and co-author of The Retirement Plan Solution: The Reinvention of Defined Contribution.
His remarks largely focused on how plan participant account statements can be enhanced to recognize the fact that the goal of employer-sponsored defined contribution plans is providing income throughout retirement, not simply the accumulation of assets.
Disclosure of account balances should be supplemented with information that can help individuals better track their progress toward this goal.
For example, a statement that currently highlights the fact that a participant has $50,000 in savings would be replaced with another that might read, “This $50,000 is likely to provide you with about $X in monthly income, if you retire at age 65.”
"This is a simple change but a fundamental one. It aligns disclosures with the objective of the system,” Collie said. “Disclosure of progress in terms of retirement income would be a force toward a better system, because, as has frequently been said, what gets measured gets managed."
What do you think? Will either approach — raucus rallies or reflective hearings — be effective in improving the nation’s retirement readiness? Can adjusting income statements really bring about “fundamental change”? Or, are we simply a nation of overspenders and undersavers destined to reap what we sow?
Sound off in the comments.
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