US Retirement Crisis – Bad and Getting Worse

Since the launch of KCS in August 2011, we have had as our mission the preservation of defined benefit (DB) plans as the primary retirement vehicle.  Unfortunately, the use of DB plans continues to wane, and today there are fewer than 24,000 DB plans in the US.  The private sector has been hit particularly hard with only 10% of companies using DB plans covering only 18% of the workforce.

We continue to believe in our mission, as we forecast that there will be economic consequences and perhaps social ones, too.  In a recent study by the Center for American Progress, titled “The Reality of the Retirement Crisis”, by Keith Miller, David Madland, and Christian E. Weller (January 26, 2015) the magnitude of the problem is brought front and center.  I would encourage each of you to read the report because if nothing else, it will hopefully get you more focused on the importance of funding your retirement, as early as possible.

Highlights (perhaps lowlights):

  • Millions of Americans will likely have to reduce their annual consumption by a significant margin in retirement
  • It is estimated that nearly 50% of US households are in danger of having insufficient assets to meet retirement needs
  • According to a recently released household survey conducted by the Board of Governors of the Federal Reserve System, as of 2013, approximately 31 percent of Americans reported having zero retirement savings
  • As of 2013, the median retirement account balance among all households ages 55 to 64 was only $14,500, and these are near-retirement households.
  • The NIRS suggests that more than 2/3rds of 55-64 year olds will fall short in retirement
  • Importantly, a couple in retirement should expect to spend more than $220,000 on healthcare expenditures alone
  • Given the weak savings rates, where are those assets to come from?

As you can see, KCS personnel may have sounded a bit like “Chicken Little”, but our concerns haven’t been unfounded. Regrettably, there isn’t much that can be done at this time to protect the 55-64 cohort, but there are game plans that can be instituted to help those that follow.  However, time is of the essence! The failure to help our workforce retire with dignity is unacceptable and the ramifications profound.

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