Editorial: Lack of retirement saving paints a scary picture
To say that many Americans are not financially prepared for retirement is quite an understatement.
An estimated 44 percent of baby boomers who hope to retire in the next few years are at risk of coming up short on money for the basics -- food, housing and uninsured health costs, according to the nonprofit Employment Benefit Research Institute.
For many low-income families, that shortfall can come very quickly, even in the first or second year of retirement. But the EBRI's long-term models also show that many higher-income households can feel the pinch deeper into retirement, especially when nursing home and other health-care costs come into play.
Unfortunately, the forecast is not much better for the generation that will follow, those who are 34-49 today, the study shows.
Although private industry pensions have been on the decline for decades, Americans have been slow to start saving on their own for retirement.
For many companies, those defined benefit pension plans were typically replaced with 401(k) programs that allow employees to have money deducted from their paychecks and placed in a tax-free retirement account. Some companies even match a portion of the savings.
But the EBRI reports that 46 percent of workers do not participate in the 401(k) plans available to them, and 32 percent of all full-time and part-time workers do not even have access to such a program.
Unless those workers are setting up their own retirement accounts, many will be relying on Social Security alone in their retirement years, and that can be a struggle.
Several states and the federal government are working on plans to offer 401(k)-type savings account programs to those who do not have a program available through their workplaces. A similar bill has been proposed in West Virginia, but it did not pass. California's plan would even make some withholding mandatory, although that provision has yet to clear all the necessary legal hurdles.
The financial industry already provides plenty of different plans for retirement saving, whether they are offered through employers or not. So, it remains to be seen whether adding government-managed plans will help.
Clearly the greater need is to help the public understand the need to save for retirement. Some of that education can take place in the workplace, but it needs to start with better financial education in high schools and colleges.
Saving for retirement is no longer just smart -- today, it is essential. And the sooner workers get in the habit, the better off they will be.
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