"I'm not sure what would be worse. Millions of elderly unable to house and feed themselves … or the intergenerational strife that surely would erupt if young people are forced to lower their standard of living to pay for our failure to act in a timely manner to avert this crisis."
Ronald O'Hanley, president, Fidelity Investments, in 2013 remarks
Hey, Ron. Here's what will be worse. Millions of seniors unable to pay their own expenses — and — younger family members financially saddled with their parents' long-term care.
Yes, folks, once again it's time to hit the weary panic button on the looming disaster of too many folks entering retirement without having saved enough money.
I believe Aesop grasped this problem long ago in his fable The Ant and the Grasshopper. We still have not learned from it.
Fresh alarms are sounding from numerous experts urging new retirement reforms. Thank the combination of poor financial habits and difficult economic trends for making America's already ugly retirement predicament even worse.
Look at what we are facing. Recession and slow recovery. Job losses. Stagnant wages. Investment stumbles. Disappearing pensions. Financial illiteracy. Loss of home equity. Excessive debt. Rising cost of living. Lack of discipline to save. Living longer. Low interest rates. Fear of the stock markets. Student loans.
That unfortunate U.S. addiction of living beyond our means.
Mix these together for a perilous outlook for retirement in the country.
More than a third of Americans now say they don't ever expect to retire but instead will have to "work until I'm too sick or die." That's one finding of Wells Fargo's annual "middle-class retirement" survey of 1,000 middle-class Americans ages 25 to 75.
(Apparently Wells does not even want to ask what the lower-income population thinks of its prospects.)
How do you fix a dire retirement future so late in the game, when federal policymakers can't tie their own shoes without filibusters and government shutdowns?
Decades ago, the country got so worried about a coming retirement debacle that Individual Retirement Accounts and 401(k) accounts were created to encourage more savings.
Now those devices are failing us. Too few people use them. And those that have them are not saving enough. It does not help that companies that used to chip in matching funds cut back or halted those contributions during tougher times.
The retirement savings crisis in America is so acute that at least one prominent expert is calling for a mandatory savings program above and beyond existing 401(k) and other pension plans.
Alicia Munnell wants more forced savings. Quickly.
"The nation requires a new, mandatory tier of retirement accounts, initiated by the federal government but managed by the private sector, that will replace about 20 percent of pre-retirement earnings," Munnell, director of the Center for Retirement Research at Boston College, said earlier this year. Keep the 401(k), she says, but require participation and escalate the amounts that must be invested in them over time.
Good luck on that. Government-mandated savings plans could run into the same political firestorm now confronting the Affordable Care Act.
So what will happen when unprepared millions of seniors run out of money? The government and taxpayers will be forced to step in to bail them out in some fashion.
Maybe Munnell is on to something.
That's not all she wants to change.
Stop preaching 65 as the expected age of retirement, she says. Social Security benefits peak at 70 (those who retire earlier receive less money) and Munnell argues it is important that people who can should work longer.
"Policymakers need to inform those who can work that 70 is the new retirement age and devise ways to protect those who cannot work," Munnell writes this month for the center's research publication. "People are healthier, better educated, have less physically demanding jobs, and can work longer. They are also living much longer."
Which makes the threat of running out of money much more likely.
• • •
Whenever my wife and I visit with brothers and sisters, inevitably we end up talking about retirement challenges. We laugh, nervously, and swear we'll all end up living in one house to share living expenses and look after one another.
We may be on to something. A wave of recent analysis on retirement spotlights a multitude of challenges. Here are three takeaways:
• More than half the middle class (59 percent) are very clear that their top day-to-day financial concern is "paying the monthly bills," an increase from 52 percent in 2012, Wells Fargo's retirement survey found. Saving for retirement ranks a distant second place, with 13 percent calling it a "priority." An alarming 42 percent of middle-class Americans say saving and paying the bills is "not possible."
• Retirement readiness is slipping because a majority of Americans with 401(k)-type savings accounts are accumulating debt faster than they are setting aside money for retirement. That's a finding in a new report by HelloWallet, a Washington, D.C., advisory firm. The amount of money that households nearing retirement are committing to pay down debts has increased 69 percent in the past two decades.
• Some workers only now are starting to realize just how much they may need to save, says the 2013 retirement confidence survey by the Employee Benefit Research Institute. Asked how much they believe they will need to save to achieve a financially secure retirement, a striking number of workers cite hefty savings targets. A fifth say they must save between 20 and 29 percent of their income. Nearly one-quarter indicate they need to save 30 percent or more.
So what's the end game for U.S. retirement?
A lot of aging people will face lower living standards than they imagined. The children of many entering retirement will be saddled with supporting their parents — far more often than boomers helped their own parents.
And belatedly, the federal government in coming years will wonder how this retirement mess landed in its lap. No doubt, our national leaders will handle it in the responsible manner to which we have grown so accustomed.
Robert Trigaux can be reached at email@example.com.