Fixing America’s Retirement System–Some Perspectives - MarketWatch/Next Avenue
The financial world is well aware that the U.S. Social Security system is in need of repair. Just how much in need, of course, is open to speculation as we await the 2021 official update from the Social Security Trustees. And as we wait, economists and financial planners are carefully combing through the Congressional Budget Office’s mid-year reports for a clue of the trajectory toward insolvency. It’s generally no secret that this trajectory is accelerating.
The CBO last month confirmed its earlier estimate of the depletion date for the combined Social Security Trust Funds as 2032—a full three years earlier than the Trustees’ most current projection of record. This projection, of course, assumes that current laws governing Social Security revenue and disbursements remain unchanged over the forecast period. The CBO included in its mid-year comments the observation that immediate payroll tax increases, reduction in scheduled benefits, or a combination of both would be necessary to continue scheduled benefits beyond the trust fund depletion, with the potential of a 25% benefit cut being the alternative.
Think about that…an across-the-board cut in monthly benefits of 25%. For those on the edge of poverty, that’s a colossal problem, made even more problematic by the absence of savings to fall back on to survive. It’s a situation that pushes the need for Social Security reform further into the spotlight, but even that isn’t the total solution to the retirement problem. An article by NextAvenue contributor Chris Farrell posted on marketwatch.com puts it this way: “America’s retirement savings system is a mess (that’s a technical economic term). “System” is actually too grand a word for the ad hoc retirement savings plan edifice that has been built up over years.” Click here to read the article…
Farrell delves into the need for overall reform of our retirement system, citing the challenges associated with the inability of workers to accumulate retirement savings, disappearing defined-benefit retirement plans, and uneven availability of retirement plans (like 401Ks, etc.) across the workplace. His article addresses the retirement system’s shortcomings and presents thoughts on steps that could be taken to help resolve the system’s current weaknesses. His article concludes with comparative comments on retirement planning in other countries.