I Think I can, I Think I can…Really?

I think I can, I think I can is a signature phrase that appeared in the book, “The Little Engine that Could” , that was first published in the United States in 1930.  The story is used to teach children the value of optimism and hard work.  Based on a recent Gallup Poll, it seems to be influencing American workers, too.  The poll asked working Americans what they expected in retirement. “Half of Americans think they will have enough money to live comfortably after they retire.” This is the first time since before the financial crisis that a majority of Americans have felt this way.

Really? Half the American working population expects to have enough financial resources to not only retire, but to live comfortably in retirement.  How is this possible? According to SSIP, there are 21.5 million US households that are considered “near retirement”.  Of these 21.5 million, 55% have no current participation in a retirement plan, and the median assets accumulated by this cohort is a whopping $4,450.  Yes, 55% of the 21 million near-retirement households have less than $5,000 in savings, and at the same time that the average American man and woman is living longer.

Furthermore, 75% of the remaining near-term households only have a DC plan as their retirement vehicle. Regrettably, only 11.7% of the near-retirement households are currently participating in a defined benefit plan.  In the 1980s, nearly 46% of American workers participated in a DB structure.  The retirement security afforded by DB plans allowed the masses to actually “live comfortably after they retire”.  Unfortunately, with the retirement risk having been shifted from the employer to the employee, the likelihood of a comfortable retirement has been severely and negatively impacted.

The potential negative economic impact on these retirees is fairly obvious, but the impact on the communities in which they live has not been discussed or analyzed enough. How will your community or state fair in the next decades?

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