This can’t be a surprise: Americans are falling further behind the rest of the world when it comes to retirement savings, Financial Planning Magazine reports. 10 Western European countries dominate the top of the list, which is based on data from the World Bank and United Nations.
After the usual scary statistics about how far behind Americans are in retirement savings and health care, the sponsor of the index trots out the usual blather about how Americans have to take more personal responsibility for their retirement savings and health care.
I’m all for personal responsibility. There are certainly are a fair number of individuals who could save a lot more for retirement but who aren’t and are also likely not taking enough responsibility for their health care. Unfortunately, most Americans aren’t in any financial position to save much more than they already are for retirement.
That’s because the income of Americans has taken a hit during the past 20 years and hasn’t yet recovered to pre-recession levels, according to Pew Research. The median income of American households in 2011 was $50,054. I challenge anyone reading this post to the math and tell me how any family of four with that income is supposed to pay taxes, a mortgage, all the regular bills, put kids through college, pay out of pocket health care expenses and actually save anything meaningful for retirement.
Actually, any family that made it through the recession and subsequent recovery sustaining that income without any layoffs or unemployment is pretty fortunate. Think about those who lost their jobs and endured lengthy periods of unemployment; many of those have likely had to cash out what little retirement savings they had to live.
More and more, Americans are being forced to take responsibility for events that are entirely beyond their means. It used to be you could have a median income and count on a pension when you retired. These days, those who have retirement plans likely have 401(k) plans where there is no obligation at all for the company to contribute anything. In fact, many companies suspended or significantly reduced 401(k) plans during the recession.
I suggest that one way to go about solving this problem is for corporations in an era of record profits to direct some of those profits to higher 401(k) matching programs or even bring back the pension. Because without some help or leveling of the playing field, millions of Americans face poverty in retirement. And that’s a problem not just for those families, but for American society as a whole.