Can You Afford to Retire?

Documentary: Can You Afford to Retire? (2006). As many SavvyReaders have come to understand, many baby Boomers are headed for a shock as they enter their retirement years. This PBS FRONTLINE television documentary notes that the two main strategies for funding retirement – defined benefit and defined contribution (e.g. 401[k]) plans – are in serious trouble.

Can You Afford to Retire

Correspondent Hedrick Smith investigates this looming financial crisis and the outlook for middle-class Americans.  The documentary notes that half of America’s private sector workforce has no employer-sponsored retirement plan; among the half that does, twice as many workers have contribution plans like 401(k)s than have lifetime pensions, a complete reversal from 25 years ago.  The move from lifetime pensions to 401(k) plans has meant that employees now bear much more of the cost, and risk, for saving for retirement.

The documentary takes viewers inside the Chapter 11 bankruptcy of United Airlines.  United dumped its pension plans, which were underfunded by nearly $10 billion, on the Pension Benefit Guaranty Corporation (PBGC), the federal agency insuring pensions that was running a $23 billion deficit at the time.  Because the PBGC only insures pensions up to a certain amount, many United employees and retirees saw their pensions slashed dramatically.

Of note, many experts believe that Americans will need to save ten times their annual pay in their 401(k)s by the time they retire.  That means saving 15-18 percent of their salaries, every year, over an entire career…certainly food for thought.  Another insightful documentary from PBS.

Watch Can You Afford to Retire? online.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

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