Our Retirement Savings Aren't Even Close to Being Enough

We all want to get government spending under control, and we also want to have a comfortable lifestyle during our retirement years.

We like our middle class entitlements. That's for sure.

But we can't afford to continue them as they are. That's for sure, too.

To get government spending under control and provide a comfortable retirement lifestyle will require that we save more of what we earn during our working years. And just how much would that be?

401(k) plan perks grow, but savings still lag says this about that:

"Workers are getting a little more help from their employers when it comes to retirement saving, but many are still falling short in building their nest eggs.

Many companies are once again matching employees’ 401(k) contributions after suspending or slashing them during the recession. In 2011, the percent of companies making those matches increased to 95.5%, up from 91% in 2010, according to survey results released this month by the Plan Sponsor Council of America, a nonprofit association that services plan sponsors.

But while more companies are contributing to retirement accounts, they aren’t as generous as they were before the financial crisis. The average company contributed 4.1% of pay in 2011, up from 3.7% in 2010, but still below the peak of 4.7% seen in 2006. . . .

Despite the return of matching contributions, financial advisers and other experts say workers still aren’t saving enough. For instance, about two-thirds of investors surveyed by T. Rowe Price said they contributed 10% or less of their salaries into their 401(k) plans, according to results released this week. And nearly a third said they were not sure how much they were saving. Christine Fahlund, senior financial planner at T.Rowe Price, recommends workers save closer to 15% to 20% of their income . . . .

Those lower savings rates mean many workers will have to delay retirement, take on part-time work, or spend significantly less during retirement, says Fahlund. Indeed, while the economy has bounced back, workers’ confidence hasn’t: Just 14% of Americans are confident they will have enough money to live comfortably in retirement, only up slightly from the low of 13% reached in 2009, according to a 2012 survey by the Employee Benefit Research Institute. And 37% of workers expect they will have to work past age 65, compared to 11% in 1991.

Some advisers say the company match may be — at least partly — to blame, pointing out that some workers see little reason to contribute beyond what their employer matches. For instance, many workers will contribute no more 6% of their pay if their employer only matches up to 6% of their salary . . . ."

Summing Up

Americans don't save nearly enough to provide for a comfortable lifestyle during our retirement years.

Then add to that the fact that individual Social Security contributions aren't sufficient to pay for the promised Social Security benefits and that Medicare contributions and what will become ObamaCare costs will put us even further behind the 8-ball.

All this means that one or more of several things must happen over time. Either we have to cut back retirement benefits, work longer, contribute more of our earnings while working or somehow reduce the overall costs of these programs.

But there are two other possibilities, both of which are undesirable.

We the People can agree to pay higher taxes or we can try to stick future generations with the unpaid bills.

It's just how the math works.

In addition to all of the above, we also will need a healthy and growing U.S. economy in the future, whatever else we may choose to do about the entitlements we're currently and have long been underfunding.

And higher taxes will reduce future economic growth. There are no free lunches.

Thanks. Bob.