Tuesday, April 04, 2006


Retirement Oz

Welcome to Oz, a magical land of make believe. Citizens everywhere have plenty to eat and lots of money in the bank. Life after work is a halcyon time. People fish, travel and otherwise enjoy recreational activities and peace of mind.

Sadly, life does not always imitate art and so it is with retirement.

According to just released Retirement Confidence Survey results, the Employee Benefit Research Institute reports an astonishing disconnect between retirement expectations and reality. Now in its sixteenth year, this study of attitudes of American workers and retirees suggests a continued gap between what people need and what they have, with two out of every three workers citing a savings balance of less than $50,000. At the same time, respondents acknowledge a longer post-retirement life span of twenty-five years or more. "Nearly 6 in 10 (58 percent) of current workers say they and their spouses do not expect to receive any health insurance from their employers when they retire", validating the need to accumulate even more savings along the way. Adding fuel to the fire, approximately sixty percent of respondents professed a desire to enjoy a comparable life style to what they have now yet have done little to determine how to achieve their financial goal.

Couple these findings with the fact that an increasing number of employer-provided plans are being frozen, terminated and/or replaced with lower-yielding defined contribution plans, if offered at all, and visions of the yellow brick road come to mind. Unfortunately, we don't have an Auntie Em to make up the difference. Trustees report that the Social Security program fails to meet a "long-range test of close actuarial balance by a wide margin" and that "Medicare's financial difficulties come sooner--and are much more severe--than those confronting Social Security".

So what now?

It is virtually impossible to fix a problem if you don't recognize its existence. Like the lion, we need courage to save more and spend less today. This is easier said than done. Record debt levels reflect a consumer preference for immediate gratification.

Individuals are not alone in their false sense of security. Federal and statehouse leaders are similarly in denial. Witness the agonizingly slow pace of retirement system reform that would promote savings, encourage investor literacy and enhance safety net solvency.

Where is the wizard when we need him? By the time the blame game starts, millions of individuals will be out of luck.
posted by Susan Mangiero at 4/04/2006 10:50:00 PM