The Looming Retirement Crisis

Falling ShortBook: Falling Short: The Coming Retirement Crisis and What to Do About It (2014). I purchased the Kindle version of this book last Saturday and have spent the last week, while on a business trip, reading it. The authors (Charles D. Ellis, Alicia H. Munnell, and Andrew D. Eschtruthnote) note, correctly I believe, that the United States faces a serious retirement challenge.

Most people understand that many of today’s workers will lack the resources to retire at traditional ages and maintain their standard of living in retirement. The authors offer the context for understanding the nature and size of the retirement income shortfall, highlighting increasing income needs-due to longer lifespans and rising health costs-and decreasing support from Social Security and traditional employer-sponsored pension plans.

Their proposed solutions are to work longer and save more by building on the existing retirement system. With respect to working longer, they suggest individuals should plan to stay in the labor force until age 70 if possible. Addressing saving more, they opine that policymakers should shore up Social Security’s long-term finances; make all 401(k) plans fully automatic, with workers allowed to opt out; and ensure that everyone has access to a retirement savings plan. Although I have no plans to work a day beyond 60 myself, the two overarching ideas – which boil down to work and save more – they offer for dealing with the crisis are solid and I unequivocally recommend those interested in retirement planning take some time to read the book. However, I do have a couple of philosophical disagreements with the authors.

First, the authors believe that a home is a source of saving, which families can tap in retirement through downsizing or a reverse mortgage. They note specifically, “The one small bright spot in this gloomy picture is that many of us are saving through our house with each monthly mortgage payment, and we could tap this home equity in retirement to help pay bills.” In a previous post, Your Primary Residence is a Home, Not an Asset, I make the point that people are better off treating their residence as a place to live and not as an investment, nor should they consider it when calculating net worth.

Second, they state that, “Social Security has been, and should continue to be, the cornerstone of the [retirement] system.” I have mixed feelings on this statement. While I agree with their idea that more could be done, and in fact, the government should be doing more to shore up the program, I don’t believe it should be the cornerstone of a retirement plan for anyone 50 years of age or younger. The reality is that the 401(k) is going to be the centerpiece of retirement plans for younger Americans. Individuals would be well served by focusing on improving their financial literacy and developing multiple streams of income, both during their working and retirement years. Ultimately, Social Security – if/when revamped – should be viewed as just one piece to a comprehensive retirement portfolio.

This book is available for purchase in both Kindle and Hardcover editions.

Broken EggsDocumentary: Broken Eggs Film (2013). Using a modified version of the Three Little Pigs as the framework, this documentary suggests that what was once a life ending in happily ever after is now a life ending in working ever after. The film takes a look at one of the gravest social issues facing an aging America, one that most politicians and too many workers – particularly those that will be impacted the most – have chosen to ignore.

Although we are living longer and in many ways are more prosperous, a growing number of Americans are falling short of a secure and comfortable retirement; and the prognosis is even worse for future generations.

Unfortunately, the film is only available for viewing via the Broken Eggs Film website. I started watching on my home computer and finished watching on a larger TV through my Xbox One, which provided a better experience. According to the website, the producers are working to get the film into theaters, and in the interim, are encouraging individuals to host a screening. Considering the film has been available since 2013, I would think the window for trying to get it a wider release in theaters is narrow if not closed. I am hopeful that the producers will soon make it available through streaming services such as Netflix, YouTube, etc. The messages contained in the film should be shared to as wide an audience as possible … as soon as possible.

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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