Imagine getting a report card to show how ready you are for retirement. Now, imagine that report card comes back with a big, fat "F." That's pretty much what labor economist Kathryn Anne Edwards is saying about the state of retirement security in America. According to her, most Americans aren't even close to being ready for those golden years.
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Edwards points out some seriously concerning stats in a webinar with the National Institute on Retirement Security:
Only 31% of Americans think they're on track with their retirement savings.
Among those aged 60 and older, just 40% feel prepared to retire.
Half the people don't even have access to a workplace retirement account.
About half the Americans have no retirement savings at all.
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These numbers are enough to make anyone a little nervous about the future. Edwards argues that these stats are a symptom of a bigger issue – how we've set up our retirement savings system, particularly the reliance on 401(k) plans. In her view, this setup isn't cutting it, and she's calling for more federal involvement in creating retirement savings options rather than leaving it up to employers.
Edwards sees the current system, especially 401(k) plans, as outdated and insufficient. "The age of 401(k)s is coming to an end," she said, pointing to IBM's decision to freeze its 401(k) contributions and Larry Fink's remarks about "rethinking retirement" as evidence that big changes are on the horizon.
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So, what's Edwards suggesting to help us pass this "retirement readiness" test? She's backing initiatives like the Retirement Savings for Americans Act, a bipartisan proposal that could make a big difference. This act would create a system similar to the Federal Retirement Thrift Savings Plan, offering all workers portable, tax-advantaged retirement accounts. Plus, there'd be federal matching contributions for low- and middle-income earners.
"I think the most successful version of this plan is that every worker, as soon as [they] get their first paycheck, gets access to a thrift savings plan account, and the government contributes on [the worker's] behalf," she explained. She's also a supporter of state-facilitated auto-IRA programs. Still, she warns that "state policy alone will not be sufficient.
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One of the biggest threats looming over retirement security is the potential depletion of Social Security. Edwards highlighted a 75-year shortfall in the trust fund, explaining, "If you add up the revenue that Social Security is projected to receive over the next 75 years and you subtract benefits that Social Security is projected to pay over the next 75 years, there's a gap."
Edwards' concerns echo what many economists and policymakers have been saying for a while – retirement security is a serious issue in the U.S. A Gallup poll backs this up, with 42% of Americans saying they're worried about not having enough money for retirement. And get this: the U.S. Census Bureau found that nearly half the adults aged 55 to 66 had no retirement savings in 2017.
Of course, not everyone agrees on the best way to fix this. Some conservatives are all for reforming Social Security and giving people more ways to invest independently. Others, like Edwards, think we need to expand or create new government-backed programs to ensure everyone has a shot at a secure retirement.
No matter which side of the debate you're on, one thing's clear – retirement security in America is a big challenge that will need serious attention from both the public and private sectors.
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This article Labor Economist Warns Americans Get A 'Failing Grade' In Retirement Security – Says The Age of 401(k)s Is Outdated And 'Coming To An End' originally appeared on Benzinga.com
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