By: Russ Kamp, Managing Director, Ryan ALM, Inc.

I’ve published a couple of posts recently on the subject of DC outcomes and retirement readiness, including How’s This Social Experiment Working? I saw more info on the subject today, as the Center for Retirement Research (CRR) at Boston College provided information from Vanguard’s annual report on the state of retirement. The information reads like a horror story.

Yes, there are some nuggets of good news highlighted by CRR having to do with growing participation among those with access to a 401(k), as there has been a jump from 72% to 83% in the last 5 years. In addition, four in 10 participants have recently increased their contribution rates, but collectively we as a nation are not saving nearly enough!

I was shocked to read that the typical 55- to 64-years-old has only saved $71,000. Apply the 4% rule and that will provide you with $2,840/year in savings to supplement your SS payout. That isn’t even enough to pay a rent for a month for most Americans. One could take more risk upon retirement and swing for the fences, but does that really make sense since the sequencing of returns is so critical and US equity market P/E multiples are screaming sell?

The problem isn’t just with the more mature worker (I’m in this category and refuse to say OLD!). According to Vanguard, “the typical worker’s 401(k) balance is a paltry $27,400,” which was down from an already low $35,300 in 2021. A decade ago, the comparable balance was $2,000 more! Oh, my! Yet, we are constantly being told that the younger generations are much savvier and understand the importance of creating a nest egg for one’s golden years. I don’t see it! Not because they don’t understand the significance of doing so, but they are burdened by life’s incredible expenditures associated with housing, education, health, childcare, food, energy, etc.

Bring back the DB plan and expand its coverage of the American worker. Asking untrained individuals to fund, manage, and then disburse a “retirement benefit” without the financial wherewithal, investment skill, or a working crystal ball is bound to be a failure. The results so far support my conclusion.