The American Retirement Nightmare

Dec 13 21:12 2019 Print This Article

Megan Leonhardt of CNBC reports that according to one economist, the system is ‘flawed’ when most Americans have little or no retirement savings:It’s no secret that Americans are falling short when it comes to saving enough for retirement. But as a new report shows, many are disastrously unprepared — and that may point to flaws in the system.Progressive think tank the Economic Policy Institute found that Americans 56 to 61 had a median balance of $21,000 in their 401(k) accounts in 2016, which is the most up-to-date data on file. That total reflects almost 30 years of savings.Younger generations do not fare much better. Older millennials (ages 32 to 37) have about $1,000 saved in their 401(k)s.The problem is that while 401(k) plans are meant to supplement Social Security, the benefits distributed by the government agency are modest. Currently, the average Social Security retirement benefit is about $1,470 a month, or about $17,640 a year, according to the Center on Budget and Policy Priorities.Meanwhile, the typical American spent about $3,900 a month last year on basics such as food, housing, utilities, transportation and health care, according to the latest consumer spending data from the Bureau of Labor Statistics. Retirement accounts, ranging from pensions to 401(k)s to individual retirement accounts, are expected to fill the gap.But when it comes to 401(k)s, that’s not happening. At least one economist says that the problem lies primarily with the plans, not with Americans’ savings habits. “The system is designed to make people feel bad about themselves — everyone privately thinks that they’re screwing up. And yet if everyone is screwing up, then it’s clearly a system flaw,” Monique Morrissey, economist at the Economic Policy Institute and author of the report, tells CNBC Make It.

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About Article Author

Pension Pulse

Leo Kolivakis is an independent senior economist and pension and investment analyst with years of experience working on the buy and sell-side. He has researched and invested in traditional and alternative asset classes at two of the largest public pension funds in Canada, the Caisse de dépôt et placement du Québec (Caisse) and the Public Sector Pension Investment Board (PSP Investments). He's also consulted the Treasury Board Secretariat of Canada on the governance of the Federal Public Service Pension Plan (2007) and been invited to speak at the Standing Committee on Finance (2009) and the Senate Standing Committee on Banking, Commerce and Trade (2010) to discuss Canada's pension system.

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