Tags: retirement | US | 401k | savings

CBS: US Retirement System Is Falling Apart

Monday, 31 Mar 2014 10:54 AM

By John Morgan

America's retirement system has entered a danger zone and is breaking down, according to CBS News, which notes that roughly half of U.S. families don't have a single dime set aside for retirement.

While millions of Americans put part of their income into an employer-sponsored 401(k), IRA or other retirement account, millions more find it hard or impossible to save because of their precarious situations — unemployment, stagnant income, impossible health costs or other factors.

"Behind these currents, as always, are political choices we make as a nation, along with the deep-pocketed special interests that steer public policy in ways that may not align with the common good," CBS noted.

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The network predicted a growing segment of the U.S. population could see their living standards erode as their retirement savings — if they have any — run out.

As of 2010, only 51 percent of private-sector workers had access to a retirement plan at work, down 10 percent from only a decade ago, according to Robert Hiltonsmith, a policy analyst at think-tank Demos.

For those who do have a retirement account, the median balance is $120,000, according to the Federal Reserve. For the typical household, that amounts to income of only $400 per month, CBS reported.

"We're already entering a crisis state, and it's going to get worse," Hiltonsmith predicted.

Although stocks have hit record highs in 2014, home prices remain well below where they were before the housing bust. "For most people, the value of their homes matters far more to their retirement prospects than how their portfolios are holding up," CBS noted.

The shift from traditional pension plans to 401(k) plans — which are expensive and in which many Americans make poor investment choices — may help explain why the United States tends to rate poorly as compared with other industrialized countries in retirement security.

"We have made it so complicated to save, and that's a problem even for Americans who are trying to do the right thing," Tracey Flaherty, senior vice president of government relations and retirement strategy at Natixis Global Asset Management, told CBS.

According to Natixis, the United States ranks 19th out of 20 among major industrialized nations in assuring the retirement security of its citizens. Nations such as Iceland, the Czech Republic and South Korea rank comfortably ahead of the United States.

CBS said perhaps the biggest obstacle to saving for retirement in the United States is that wages for nearly all Americans have been stagnant for more than 30 years — a trend that has continued following the housing crash and the weakest post-recession recovery in U.S. history.

A Bloomberg analysis found that part of the U.S. retirement security shortfall is due to a decrease in the number of employers offering 401(k)s.

"Many people in their 50s and 60s are about to find that the money they've set aside for retirement is too meager to support the standard of living they'd hoped for," Bloomberg reported.

"Soon, the long-expected U.S. retirement crisis will no longer be a forecast; it's becoming a brutal fact."

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