Retirement at risk, but can be saved, says researcher Alicia Munnell
Most Americans won't have enough income for a comfortable retirement. However, individuals, employers, and the government can take steps to improve the situation, said Alicia Munnell in her presentation on "Retirement 'At Risk': The Changing Landscape of Retirement in the
A three-legged stool of Social Security, employer-sponsored pensions, and individual savings used to support retirement better than it does today. The situation is only going to get worse because:
- Social Security will replace a smaller percentage of income in the futur
- The shift to 401(k)s--and individuals' bad decisions about them at every step of the process--is not working as well as it could
- Individuals save virtually nothing outside employer-sponsored retirement plans
To improve Americans' outlook for retirement, Munnell called for:
- Individuals to work longer, to save more through 401(k)s and IRAs, and to consider tapping their home equity in retirement
- Employers to revise personnel policies to encourage older workers and to make 401(k)s more effective through automatic provisions
- Government to redefine what's old (in other words, no early retirement at 62) and to help individuals to save more, possibly by introducing a new tier of funded, privately managed retirement savings
You can learn more about research by Munnell and B.C.'s Center for Retirement Research.
By the way, that 43% statistic might prove useful for starting a retirement savings conversation with your clients.
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Feb. 16 update
Research from the Urban Institute supports Munnell's advice about individuals working longer. It found that:
- On average, working an additional year increases annual retirement income about 9 percent (figure 1).
- Working an additional five years boosts annual retirement income about 56 percent.
- The impact is even larger for people at the lower end of the income distribution.
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Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success
Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.
Labels: client, retirement, wealth management
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