You have probably read a lot of posts and articles lately detailing how the U.S. retirement system is failing retirees. The Frontline documentary, “The Retirement Gamble“, detailed how high 401k fees are making it difficult for many Americans to save enough for retirement. In the wake of the article there were many other posts and articles stating how difficult it was for workers to save enough for retirement in the U.S. I do believe that 401ks have mostly been a failure but a recent report from the Investment Company Institute (ICI) states that the U.S retirement system is a success.
ICI states that their research indicates that the U.S retirement system has successfully provided adequate retirement sources to generations of Americans. They also state that more recent generations of retirees have been better off than retirees in previous generations. As an example they state that “the poverty rate among people aged 65 or older has declined from nearly 30 percent in 1966 to 9 percent in 2011.” Maybe things are not as bad as they seem.
The research does also show that Social Security provides a substantial portion of most retirees’ retirement resources and provides the primary retirement resources for workers with low lifetime earnings. Although the system may be successful so far it seems that any reductions to Social Security could undermine the success of the retirement system. Also the ICI indicates that the shift from defined benefit plans to defined contribution plans is unlikely to reduce retirement preparedness. I am not entirely sure of that.
Even if the U.S. retirement system is currently a success there are improvements that can be made. And the uncertainty of future Social Security benefits and the shift from pensions to 401ks could certainly have an impact on whether the retirement system continues to be successful. What do you think? Is the U.S. retirement successful? Will it be successful in the future? What changes, if any, should be made?