The Retirement Dilemma

There have been numerous studies related to long term retirement trends.  These examinations of American’s retirement prospects universally conclude that most of us are not adequately providing for our retirement years.

Some of the more important findings suggest that some of us are not saving enough and many of us have little or no savings.  Moreover, in the Federal Reserve’s 2015 report on household economic well-being, about half the respondents who said they were working towards saving for retirement were less than confident they were making good investment choices.

Some studies suggest that part of the problem relates to a shift from defined benefit pension plans to defined contribution plans and the increased reliance on 401k type plans.  Historically, defined benefit plans have provided more generous pensions than appear likely under defined contribution plans.  However, many defined benefit plans have become underfunded and are promising retirement benefits that may not materialize.

No matter the cause, most Americans do not have a combination of savings and secure pension benefits, combined with social security, sufficient to afford them an adequate retirement income.  Moreover, credible solutions are in short supply.

Investors should work with their advisor(s) to protect their own retirement prospects, and accept the possibility that providing for retirement, in many situations, will probably require some form of additional government (read taxpayer) support.  This could, for example, take the form of increased social security benefits for some and means testing for others.

All comments and suggestions are welcome.

Walter Kirchberger, CFA®