Retirement in America: Examining the Big Picture

News organizations have committed many gallons of ink and gigabytes of storage to the American retirement crisis. Some of the stories say it’s hopeless, others reference an obvious solution and still others suggest it’s not a crisis at all. In reality, these articles typically do not address the multiple facets that make up the big picture:

• Retirement savings: According to the Government Accountability Office, 48% of Americans aged 55 and older have nothing put away in a 401(k) or similar defined contribution plan, or an IRA.

• Retirement leakage: According to research from The Aspen Institute, for every $1 contributed to retirement accounts by savers under 55, $0.40 leaks out.

• Retirement income shortfalls: The pension funding gap for all 50 states is more than $1 trillion, and projections show that Social Security will only be able to fund 80% of promised benefits by 2035. 

• Demographic shifts: According to research from Intuit, between 43% and 55% of all U.S. workers will be participating in the so-called “gig economy” by 2020 as contract workers, self-employed or freelancers – all of which typically lack access to a workplace retirement plan.

These are serious issues that, when viewed under the umbrella of the retirement crisis, represent a challenge for the retirement industry. The same retirement policy and products that worked in the 1990s may not be a fit for the American worker of today. In direct response to some of these problems, state governments, private-sector providers and the federal government have put new ideas forth.

• State-run plans: With the hopes of expanding access to workplace retirement savings, 28 states have proposed legislation to provide retirement plans for private-sector businesses and workers, with eight states enacting such legislation.

• Federal legislation: Congress has attempted to expand access to workplace retirement savings with a handful of proposals over the last few years. The common theme throughout much of this legislation is loosening the rules around Multiple Employer Plans (MEPs) to make it easier for employers to offer a plan.

• Private-sector solutions: The private sector has continued to expand options for businesses and individuals, from more affordable workplace savings options for businesses to innovative technologies that help individuals save in different ways.

While these approaches and ideas are welcome, they represent only the beginning of the kind of years-long project that will need to be undertaken to evolve our retirement infrastructure to a place that works for all businesses and individuals.

Learn how our Retirement Services can help.

The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice.