With defined benefit pension plans slowly going extinct and Americans not saving enough for retirement it is becoming tougher for Americans to retire and is setting the stage for a retirement disaster…
So say edited excerpts from the original post* at My Budget 360 (MyBudget360.com) entitled Pension disaster looms over the horizon: In 1980 60 percent of Americas participated in a pension program. Today it is less than 10 percent and the amount saved for retirement is startling.
The following is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and the FREE Market Intelligence Report newsletter (register here). The excerpts may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
The trend from defined benefit pensions to 401ks started in 1980 and it was expected that most Americans would save (enough) money for retirement…but, unfortunately, that has not been the case. As such, they will have to rely on Social Security instead.
Defined Benefit Pension Plans Disappearing
As noted below, only 10% of Americans have access to a defined benefit pension although most do have access to 401k plans (65%) and other retirement options (54%).
Underfunded Pension Plans
In addition, pension issues also loom as many state governments contend with deep underfunding for retirement benefits as a result of defined benefit pension plans that are set up with unrealistic return expectations.
As the chart above highlights, many state defined benefit pensions are underfunded and if the market even has a slight correction this will exacerbate the problem.
Lack of Savings in Retirement Accounts
Without defined benefit pensions many Americans are left to fend for themselves via retirement accounts. As the table below illustrates that has not worked out very well.
These are disturbing figures. The median amount saved by all Americans is $3,000 for retirement! Even those nearing retirement in the 55 to 64 age group have roughly $12,000 to get by in their later years. In other words, many are going to be working deep into old age.
The small amount of savings set aside for retirement can be attributed to the lack of income being made by most Americans…It’s hard to get by when the per capita wage is $26,000 and the cost of living continues to increase without any wage increases. Getting by is priority number one, not a far off retirement.
Retirement Dreams Deferred
As you would imagine the retirement age is being pushed out:
With the retirement amount saved so low many are going to depend on Social Security as their main income stream in their later years and much of this money is going to be paid by a younger and less affluent generation…If you think you have heard the last of this think again.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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