Saw an article this morning that floored me. The gist of the story was related to a panel discussion on how to secure retirement options for younger employees. The three suggestions included, work longer, cut benefits, and save more. Well isn’t that just brilliant! Why didn’t we, at KCS, think of those as being the way forward for our retirement industry? Shame on us!
Given that there are roughly 94+ million age-eligible workers on the sidelines (LPR of 62.7%), working longer may just not be available to the average employee. With regard to benefits, the slashing of those has been taking place for a long time, as DB plans are replaced by glorified savings accounts (DC plans). In addition, the DOL is permitting “critical and declining” multi-employer DB plans to dramatically slash the benefits being received by those already retired.
Finally, why don’t we just ask everyone to save more? This should be really easy in this “robust” economic environment. Here are two more data points to squash that assumption. First, the “bottom” 90% (based on wealth) in the U.S. have seen their share of the total pie fall from a high of 36% to today’s 23%, while at the same time the top 0.1% have seen their share grow to 22% from only 7% in 1977.
In addition, 91.2 million Americans are making less than $35,000, and the average wages for that quintile is only $14,600. Last I looked, that is a level that would fall below the poverty line, and is certainly a lot less than what is needed to provide housing, food, education, transportation, healthcare, etc. Where is the disposable income needed to save more?
Given the above information, it is now time that we do some real soul searching on what needs to be done to protect the masses because working longer, cutting benefits, and saving more is not what we need in this environment!