For anyone who follows the KCS blog on a regular basis you understand how concerned we are about the U.S. worker’s lack of retirement readiness. Unfortunately, we aren’t making much progress, and in fact, our ability to meet short-term obligations is getting strained too, let alone our long-term obligations (retirement).
In a recent poll conducted by Bankrate, 46% of Americans don’t have enough savings to cover 3 months of expenses, and more than 50% of them don’t have any emergency funds. Regrettably, 62% of our population couldn’t cover 5 months of expenses should they find themselves out of a job.
Competition for our discretionary income is fierce, as Americans are being asked to fund retirements (DC, as opposed to DB), greater health care expenses, and ever-expanding education costs, in an environment in which real incomes have been stagnant for quite some time. For those Americans who find themselves earning less than the median family income, life gets in the way, and it is proving very difficult to be able to cobble together an emergency fund. This, in an environment in which we are told that we are at “full employment” (4.7%), despite having 93 million age-eligible (16-65 year old) workers on the sidelines.
The demise of the traditional defined benefit plan is going to lead to profound social and economic ramifications in the next 15-20 years and beyond. Providing our students with greater financial literacy will help, but it isn’t a silver bullet. We need U.S. companies investing in their businesses and employees. It is through a growing economy, with real wage growth, that we can begin to ease some of the financial burden that most Americans are now facing.