America’s Retirement System Is Failing Us

[HK in AK]

This shows you how people are living in excess of what they can actually afford.

Your "golden years" may not be so golden.

The majority of Americans (75 percent) nearing retirement age had less than $30,000 in their retirement accounts in 2010. For the poorest Americans in the 50-to-64-age bracket, the average amount saved for retirement was $16,034.

The lack of nest egg savings could become an acute crisis in the U.S. and should force a reexamination of the nation's retirement system, says Teresa Ghilarducci, a professor of economics at The New School.

In a recent New York Times Op-Ed, Ghilarducci argues that the current retirement savings model has failed middle-class Americans. The "do-it-yourself" pension system — aka 401(k) plans — that replaced traditional pension packages 30 years ago mistakenly assumed that individuals without investment experience could "reap the same results as professional investors and money managers," she writes.

In an interview with The Daily Ticker, she says individuals "were asked to do what they really couldn't do. Not because they're irresponsible, not because they didn't plan well, not because they didn't have enough financial literacy. That system asked humans to do what they just can't do — anticipate the future."

Link: http://finance.yahoo.com/blogs/daily...153445894.html

[commanding]

Generally I agree with the article you linked to and your comments. The "old" 401k program, when it came out was cheaper for companies to administer for their employees and easier, and had the advantage of not only allowing employees to manage their own investments, but also it supposedly encouraged MORE private investment in stock exchange companies....thus growing the economy. Many companies matched a percentage of the amt. each employee put in the 401k also thus increasing their own retirement funds.

There were hitches in the giddie-up though, as with all things. For one thing, the old days of investing the money in a "blue chip stock" and never looking at it again, were long gone. Investments required/require constant monitoring.

Americans, generally, by the time of graduation from high school, have never had any education/classes in money management,(nor in parenting another of my pet peeves). Therefore, there was/is a general lack of understanding of living within ones means, not going into unpayable amts. of debt, etc.

Since most Americans and others in industrialized nations, are bombarded with commercials that tempt them into buying tons of stuff they do not need, but merely desire....not much money is saved for retirement or emergencies. Everyone thinks they must have a new large home, a new car every 4 years, the newest M16 rifle with top dollar rails, scopes, lights etc.

just my 2cents

[HK in AK]

As a rule of thumb, and some financial calculations, my goal is to have $1.6 million set aside in a retirement account, exclusive to any other retirement benefit I may receive. At 46, I am about 30 percent of the way there, which means that I am hitting the point where the funds will grow from capital appreciation. My worry is that with the stock markets in disarray, I may have to make additional assumptions that will require more money being set aside.

[Andrew Chalmers]

In my personal experience, a lot of saving for retirement simply meant putting money away.

I always contributed to my 401 - but only to the extent of maximizing my employer's contribution, which was merely 6% out of paycheck. If you're only putting away 6% of your $ for retirement - unless you're making big bucks - it'll never be enough.

I don't know why people expect social security or their 401k to allow them to retire comfortably. Then again I'm the guy who is driving a 6 year old car that feels brand new to me.

[commanding]

As a rule of thumb, and some financial calculations, my goal is to have $1.6 million set aside in a retirement account, exclusive to any other retirement benefit I may receive. At 46, I am about 30 percent of the way there, which means that I am hitting the point where the funds will grow from capital appreciation. My worry is that with the stock markets in disarray, I may have to make additional assumptions that will require more money being set aside.

A lot depends on how "high on the hog" one plans to live during retirement and how long one will stay above ground after retirement. Also a lot depends on how much money one puts in investments where there is a possiblity of losing a butt load of money....vs money one keeps in "cash" in retirement funds.

Don't forget you have to pay taxes (even at a reduced rate) when you do retire..and some 401k mgt funds require you to pay THEM a fee each time you withdraw money from the funds. Plus you have to pay federal income taxes on your social security money you draw, and also have to pay money each month for some basic medicare coverage.

Some people want to travel after retirment, travel all over the world, spend a lot of money doing things. Others are less apt to live a post retirment lavish lifestyle.
Some people will require a lot of money for long term care or housing...i.e. retirement homes, alzheimer care, etc. Others do not. It is all a big crap shoot.

[Kilgor]

Call me a Doom****er, but what happens when the inevitable mother of all crashes comes along and destroys savings ?

[Abolith]

Call me a Doom****er, but what happens when the inevitable mother of all crashes comes along and destroys savings ?

then you're like my uncle and working until you die of old age.... he's 75 and still can't retire, resigned to the fact that he screwed up.

[DimoN]

Yup, blame it on personal money management, of course.

My family was very quite wealthy during USSR with ample savings - in a matter of days this was all worthless due to an economic collapse. I guess no one taught us "personal finance management" and that you should invest in real-estate and gold to bury in your backyard for better days.

[commanding]

Call me a Doom****er, but what happens when the inevitable mother of all crashes comes along and destroys savings ?

yes what Abolith said. Even when the tech stock bubble burst in the 1990s, I lost over $65,000 in retirement savings, and that was about 12 yrs prior to my retirement, so that hurt a lot. So you do what you have to do as always. man is a very adaptable creature.

[Chiptox]

then you're like my uncle and working until you die of old age.... he's 75 and still can't retire, resigned to the fact that he screwed up.

Heh, that's going to be the reality for all of us youngin's. We don't even have to screw up to get there. It's the new-old economic reality, unless you are wealthy you work (at least part-time) until you die. The middle-class should never have been able to punch out of the workforce in their late 50's/early 60's like they have done for the last few generations and we're paying the price now.

[Roaming East]

Heh, that's going to be the reality for all of us youngin's. We don't even have to screw up to get there. It's the new-old economic reality, unless you are wealthy you work (at least part-time) until you die. The middle-class should never have been able to punch out of the workforce in their late 50's/early 60's like they have done for the last few generations and we're paying the price now.

Low retirement age had nothing to do with it. On the contrary, removing 'old' blood from the work force allows for younger workers to get jobs. There are only so many to go around and if half of them are held by the over 40 crowd, you're screwed when they hit retirement age because A-you dont have enough young people working to allow for social security type models to exist, and B-the jobs they DO have are almost entirely entry level. In the 90's it was nothing to hear about young 20 and 30 somethings owning their own businesses are pulling down 6 figures in middle management or higher. Now in 2012, those 20-30 somethings are still in those same jobs, and the level of upward mobility that led to the tech boom is no longer with us.

[Corrupt]

Low retirement age had nothing to do with it. On the contrary, removing 'old' blood from the work force allows for younger workers to get jobs.

That's largely wrong. It's not a simple case of 1 in, 1 out, or even remotely similar. Think about it, if more people are working, that means that more people are paying taxes and spending money in shops. Which means that the economy expands and jobs are created.

[Roaming East]

That's largely wrong. It's not a simple case of 1 in, 1 out, or even remotely similar. Think about it, if more people are working, that means that more people are paying taxes and spending money in shops. Which means that the economy expands and jobs are created.

And the problem again is that people ARENT working. Nothing stimulates the economy more than a young family. 20-30 somethings buying homes, cars, and luxury items for their families. You eliminate the job base that supports that, and you get what we have today, a lot of unemployed young college grads making minimum wage, delaying starting families and not contributing to the tax pool. Politicians like to act like a 25 year old working 40 hours at Walmart and subsisting on government aid is 'making out like a bandit' but the truth of the matter is that he would MUCH rather have a high paying job that utilizes his education and affords him economic freedom. Its hard to get that when the only jobs hiring want 10 years of experience regardless of whether its an entry level job or not.

[commanding]

Heh, that's going to be the reality for all of us youngin's. We don't even have to screw up to get there. It's the new-old economic reality, unless you are wealthy you work (at least part-time) until you die. The middle-class should never have been able to punch out of the workforce in their late 50's/early 60's like they have done for the last few generations and we're paying the price now.

Don't be so quick to count yourself out. If you "get lucky" we may hit another time of out of control inflation, as in the Jimmy Carter years, and if you are lucky you have bought a house/property that will double or triple in value in maybe 9 or 10 years. This can add a lot of dough to your nest egg, then if you retire you can move to smaller quarters once children grown etc and make a ton of money on the old property sale. (we more than doubled our money on our first house, due to the Carter inflation years, within about 10 years)

[Andrew Chalmers]

yes what Abolith said. Even when the tech stock bubble burst in the 1990s, I lost over $65,000 in retirement savings, and that was about 12 yrs prior to my retirement, so that hurt a lot. So you do what you have to do as always. man is a very adaptable creature.

I lost something similar - although I should say my lesson from that is we should never consider anything in my IRA or investments as savings... more like potential retirement funds.

As far a the value of USD - whenever the fiat confident in USD collapses, my fallback currency will be my simple home + land defended by my children and I - because that'll be a scary day.

Don't be so quick to count yourself out. If you "get lucky" we may hit another time of out of control inflation, as in the Jimmy Carter years, and if you are lucky you have bought a house/property that will double or triple in value in maybe 9 or 10 years. This can add a lot of dough to your nest egg, then if you retire you can move to smaller quarters once children grown etc and make a ton of money on the old property sale. (we more than doubled our money on our first house, due to the Carter inflation years, within about 10 years)

Triple in $ only no? You'll end up with a bunch of cash, but the "value" represented by the $ will be no different. So your domestic purchasing power will have not changed while we will all have to pay more for foreign goods, services, and resources.