Feature

Editor's letter: America's retirement savings

As this week’s Briefing points out, providing for retirement savings through 401(k) plans is a disaster in the making.

Individual responsibility is an admirable concept—and in theory, a fine foundation for public policy. In practice, it has but one flaw: human folly. Most people do not act rationally or responsibly or even in their own long-term self-interest. When presented with the opportunity to sacrifice some goodie now for future gain, human beings often postpone hard choices until...tomorrow. Consider the state of America’s retirement savings. In the 1980s, major employers began phasing out pensions, putting the responsibility on individual employees to provide for retirement through 401(k) plans. Sounds reasonable enough. But how’s that working out? As this week’s Briefing points out, it’s a disaster in the making. Half of all workers have put nothing away for retirement. Baby boomers ages 55 to 64, on the cusp of retirement, have a median 401(k) savings of only $78,000—a pittance. To sustain a middle-class lifestyle across 15 or more years, the financial experts say, a retiree needs savings of at least $900,000.

Let’s roll the calendar forward to the year 2025. There will be more than 50 million living boomers over the age of 65. Social Security is pretty thin gruel, so many of them will quickly run through their meager savings, and find themselves sliding toward poverty. Will my spoiled boomer brethren go gently into that good night? Or will we demand that government somehow bail us out of our shortsighted foolishness? All this will hit the fan, mind you, at the same time that fiscal reality will exert enormous pressure on the government to cut spending on Medicare, Medicaid, and even Social Security. It’s not going to be pretty.

William Falk

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