Hard Facts cannot be ignored.
There are some difficult facts about retirement saving that must not be ignored. According to data from the “2017 Finances in Retirement Report” compiled by Merrill Lynch and Age Wave, 81% of Americans have no idea how much they will need in retirement. Those who have given thought to this believe that a minimum of 25% of disposable income should be. Unfortunately, those same individuals are saving only 6% of their income. Perhaps the most frightening numbers inside the report are 1/3 of adults have no savings for retirement and nearly on-half of those in the millennial generation have not begun saving!
Proposed…A government offered plan would save us.
There is good news to be found in this report. Those of moderate income (between $30,000 – $50,000 per year) are fifteen times more likely to save when they have access to a retirement plan at work. Based upon this information and other studies, it has been proposed that cities, counties, states, and the federal government should organize payroll-deduction individual retirement accounts, available to all who do not have access to “company retirement plans.” The problem of lack of retirement savings, it seems, fully rests on the fact that some people work for companies that do not sponsor IRAs, 401(k)s, and other retirement plans. If the government would offer them, the problem would be solved.
Is the solution this simple?
It is true that approximately 55 million Americans do not have a company sponsored retirement account,1 but more than one-half of those who do have access to these programs do not take advantage of them.2 Would government sponsored accounts guarantee individuals would save? Retirement savings opportunities abound in the USA. Virtually every Bank, Credit Union, local financial institution, brokerage firm (both with offices and online), no-load mutual fund family, life insurance Company, and more offer easy access to IRAs…both Traditional and Roth. It is potentially as easy to set up a retirement account as it is to purchase milk and eggs since the nearest Wal-Mart and grocery store likely have a branch bank in the lobby! There is no evidence that those who are not saving through all the currently available opportunities would do so in significant numbers simply because a city, county, state, or federal government entity added another opportunity.
The REAL Problem
The root cause of the problem is not a lack of opportunities to save as much as it is a lack of commitment on the part of individuals and families. GuideStone offered “11 Ways to Find Money for your Future” on its website, and each relied upon simple individual self-control.3 The Motley Fool presented “3 Reasons American Don’t Save Enough for Retirement”…procrastination, refusal to establish priorities, and a failure to grasp the significance of saving.4 U.S. News & World Report suggested “7 Reasons Americans Can’t Save for Retirement,” and they included savings isn’t a priority, too much debt, spending sprees following receiving financial windfalls, and simple living beyond our means.5
Certainly, some would take advantage of government-offered and government-run retirement savings plans. However it is clear the saving problem is personal. When individuals accept the responsibility for their financial future and change current behavior from spending to saving, only then will they take the first steps toward retirement independence. Neither Uncle Sam nor Aunt IRS can save us from ourselves.
1 Rising Risks for Retirement Savers. Editorial Board. The New York Times. April 6, 2017.
2 The Retirement Crisis: Why 68% Of Americans Aren’t Saving In An Employer-Sponsored Plan. Shin, Laura. Forbes. April 9, 2015.
3 11 Ways to Find Money for your Future. GuideStone. May 24, 2016.
4 3 Reasons Americans Don’t Save Enough for Retirement. Motley Fool Staff. The Motley Fool. January 26, 2015.
5 7 Reasons Americans Can’t Save for Retirement. Brandon, Emily. U.S. News & World Report. February 23, 2011