The WSJ has produced an article in today’s edition addressing the impact of the retirement wealth gap that exists among Americans. We, at KCS, have been forecasting profoundly negative economic and social ramifications due to the retirement industry’s failure to adequately prepare our retirees.

I attribute much of this unfolding crisis to the demise of the traditional defined benefit plan, while others feel that since only about 40-50% of Americans were ever covered by these plans that can’t possibly be the reason. I strongly disagree. If only we were able to maintain that peak coverage, as today we have about 14% of the private sector in DB plans with many of those participants in frozen programs that are no longer accruing benefits. Furthermore, there are growing pressures on many of the remaining public and multiemployer DB plans that call into question their long-term viability.

The Journal article highlighted the impact that this wealth divide is having on retirement communities (they specifically focused on Oakmont Village in Santa Rosa, CA) where those living on fixed incomes are finding it very difficult to sustain their independence and maintain households in the face of growing monthly dues as well-heeled residents demand upgrades to facilities and more expensive amenities that many residents just can’t afford. It is shameful that residents are being driven from these communities that have become too expensive.

We believe that America needs to address this growing issue, and soon. From an investment standpoint, the absence of affordable senior housing needs to be tackled, which provides our institutional real estate managers a plethora of opportunities. With nearly 10,000 Baby-Boomers reaching age 65 daily and for the foreseeable future, the need appears to be only growing.

We are often criticized as we travel around the country speaking to the need to protect and preserve DB plans, but the migration to defined contribution plans is not working for the majority of American workers. It is poor policy to believe that the average American worker will be able to fund, manage, and disburse a retirement benefit without the financial and educational means to accomplish this objective.

Our support of the Butch Lewis Act, which attempts to preserve DB plans for the most challenged multiemployer pension systems, reflects our understanding of the social and economic implications for the millions of American workers who would see their promised benefits substantially reduced! It is about time that our “leaders” understand that we are going to pay to protect these individuals in one form or another. I suspect that most of those at-risk beneficiaries would much rather have their promised benefits than to fall onto the federal government’s social safety net.