Crisis of Retirement

Crisis of Retirement in the USA

Best advice is that everyone should be saving for their future, an emergency fund as one safeguard against financial problems and of course retirement, not matter how remote it appears to be. The message seems to be getting home to those who are in their 20s, certainly much more than to those a generation or two older. The problem is that the retirement vehicle that has been perceived as the best vehicle for retirement seems to be dramatically underperforming. The 401k on the surface seems ideal. It is something that employers can contribute towards, matching the individual's saving up to a certain limit. There were tax advantages for the individual so the 401k seemed to be a win-win.

No Guarantees

The problem is that the 401k does not come with any guarantees. Its performance is dependent upon an individual's decisions and clearly financial expertise is not in everyone's gift. The years of the recession were the most recent hiccup for the 401k. Real estate prices fell and investments in general struggled. The result was that 401ks had often completely stagnated during that period. Indeed there are figures to show that quite a number had to withdraw savings precisely because they were in financial trouble. There had been a difficult period a few years earlier as well. Even those that had planned properly found that their savings were not growing as they would have liked.

While 401ks had risen in popularity, the traditional retirement plan that employers had offered where all the risk was theirs were fading from the picture. They were fairly happy that they no longer had the problem of offering a defined benefit as a condition of employment.


The Economic Policy Institute (EPI) has spelt out the problem that many Americans are facing, even those who have tried their best to save for retirement. They represent around half the population so the other half is struggling anyway. The average saving across the whole population is just $5,000 and even more worrying in those closest to retirement it is only $17,000.

It is clear that people have not got surplus income to put away. If an employee had a guaranteed plan from his or her employer then it was not a matter of having to save anything out of the monthly pay check.

The vast majority of people does not have the personal knowledge and expertise to understand and manage an investment such as a 401k involves. Certainly in lower levels of society that is virtually everyone, whatever their ethnic background. The reality is that the 401k only really works for those that need it the least, the upper classes.

Social Security

With guaranteed benefit plans disappearing and 401ks struggling that leaves the third option, the Social Security System which was designed to support people in retirement, not completely fund their lives. There is an increasingly strong argument that the System should be strengthened but the opposite is happening; the System is getting progressively weaker and estimates suggest that without a significant boost in funds, the level of benefits will have to fall by over 20% within two decades.

There seems to be no sign that Congress will sanction the required increase in taxation to boost the funds within the System. Currently there are fewer people contributing and an ever increasing number of people wanting to receive benefits. Those who are earning good pay checks every month and are actually benefitting from their 401ks have little desire to pay more taxes to help what is effectively the bulk of society. The Republican Party is certainly on their side. While there is a Presidential Election looming and a new President in the White House early next year that is not the whole story.


Legislation is largely dependent upon the composition of Congress, the House of Representatives and the Senate. Currently the Republicans have a majority in both Houses even though there has been a Democratic President just finishing his second term. If there is no switch giving the Democrats a majority then even with a new Democratic President there will be resistance to increased taxation as there is Republican resistance to most Federal intervention.

No one can predict what is going to happen in the coming years but it does illustrate that the Social Security System looks to be far from the retirement solution that it needs to be. It almost seems as though it's not worth even trying to save for the future. That would be wrong. Everyone needs good financial management and that includes cutting out waste. That involves not paying excessive interest on credit card debt; better to pay off any balances with a consolidation loan that is likely to be available to anyone who has regular income to justify instalment repayments so fastest lenders to borrow unsecured $100-5000 are now easily accessible online . Why pay more than necessary on utilities, on insurance or your telephone?

There is no doubt that everyone aspires to a long and comfortable life and that requires finance. Not everyone can get a high paid job and many people do not have the capabilities to hold such position. What every citizen of the USA deserves however is the support of the Country and that means financial support where it is deserved and required.

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