- The Washington Times - Thursday, March 11, 2010


The United States is facing a crisis over the next 20 years that will test our values as a nation and the well-being of our most vulnerable citizens. Hundreds of thousands of Americans approaching retirement will suffer economic hardship in their twilight years because they have not saved enough money to provide for an adequate lifestyle when their working days are over.

They will become a burden on their families and the next generation of working Americans unless we take steps now to mitigate the problem. We must find ways to encourage Americans to step up their savings and learn how to manage those savings to assure lifetime financial security.

I know this may be asking a lot during these hard economic times. Nevertheless, the situation is so serious that it cannot be put off until after the economic crisis ends. The first step is to encourage Americans of all ages, but especially those facing retirement, to honestly confront their economic situation and then commit to making savings a priority.

Consider this: According to the Employee Benefit Research Institute, 49 percent of American workers over age 55 have less than $50,000 in total savings and investment. Let me repeat that - less than $50,000 to pay for living expenses during a retirement that could last 30 years or more.

Those Americans will have to pay their rent, buy food, pay medical expenses and purchase medicine in their 70s, 80s and 90s relying almost exclusively on Social Security. And the current average monthly Social Security benefit is just $1,153. It’s frightening, and tragic, to think about the deprivation that awaits so many people when their health and mobility are in decline.

Social Security was never intended to be the sole income source for retirees. Instituted in 1935 as America struggled through the Depression, it provides an important first layer of guaranteed income to retirees. But President Franklin D. Roosevelt and those who designed Social Security always envisioned it as a supplement to private retirement savings, not a substitute.

For much of the post-World War II era, American workers could rely on pension plans provided by their employers for an additional layer of lifetime income. But all that began to change in the mid-1980s, when the burden of both saving and assuring lifetime retirement income started to shift from employer to employee. In 1985, 80 percent of full-time employees participated in a pension plan that guaranteed lifetime benefits. But by 2008, just 20 percent of full-time employees were covered by such a plan, according to the Bureau of Labor Statistics.

By contrast, in 2008, 67 percent of full-time employees participated in retirement plans that require the employees themselves to manage their assets to assure lifetime income. The result? Far too many workers neglected to put away enough money to assure an adequate retirement. Now the problem has reached the crisis stage.

Congress is considering several measures to encourage Americans to save money and plan better for retirement. First and foremost, however, workers must make a personal commitment to save money and better prepare for retirement. There is no better place to begin than at the workplace. Many employers offer payroll-deduction plans that place a portion of employees’ salaries in a tax-favored retirement savings account. Moreover, many employers add to employees’ retirement savings by matching a portion of the payroll deduction.

For those without employer-provided pension plans, you must avoid excuses not to save. There are numerous tax-favored savings options, such as IRAs and annuities. All Americans should commit to a plan to provide for their own retirement and stick to it despite all the temptations to spend that money elsewhere.

Let me close on a personal note. The other day, I enjoyed an outing with two of my grandchildren. They are a great joy in my life, and every minute I spend with them is precious. As I began writing this commentary, I thought about all the retirees whose grandchildren have moved away and reside in different communities all across our great country. Those retirees who failed to save adequately, who must devote most or all of their income to addressing their basic needs for food, shelter and medical care, who cannot afford to travel to visit their grandchildren and share in their lives are suffering an incalculable loss.

“Savings” is not a mere buzzword. It is the underpinning of helping our retirees live fruitful and meaningful lives. Let’s all make a personal commitment to our own future and the future of our loved ones to prepare for the inevitable time when our working days are over.

Frank Keating is president and chief executive of the American Council of Life Insurers.



Click to Read More

Click to Hide