In Our View: Messing With Retirement

Circumstances are working against it, and most workers aren't ready for it



The popular visions of retirement as an endless series of sun-drenched days spent gardening or golfing might not mesh with reality. And, according to a new report from the Associated Press, that bucolic fantasy is likely to be even further removed from fact for future generations.

The Great Recession of recent years has exacerbated some painful truths: Countries are slashing retirement benefits and raising the age to start collecting them; companies are eliminating traditional pension plans and putting the onus on workers to save for retirement; and workers are doing a poor job of saving and preparing for those carefree days in the sun. All of these factors were in motion prior to the worldwide economic downturn, and now they have grown more dire.

The Great Recession pinched governmental and corporate budgets and, in many cases, forced workers to dip into savings that had been earmarked for retirement. In addition, lost wages or stagnant wages are impacting lifetime earnings, which typically are used to calculate retirement payments from programs such as Social Security. Add in the fact that people are living longer, which requires more money to facilitate an extended retirement, and all the factors are working against late-life comfort.

“Most countries are not ready to meet what is sure to be one of the defining challenges of the 21st century,” says a report from the Center for Strategic and International Studies in Washington, D.C.

Most workers are not ready, either. According to various retirement calculators, a single 40-year-old making $50,000 a year will need to have $1.2 million in savings in order to retire comfortably at age 65; somebody who is 30 now will need to have $1.9 million in order to retire when they are 65. But the National Institute on Retirement Security estimates that Americans collectively are at least $6.8 trillion short of what they need in savings for a comfortable retirement. Investing a portion of salary into retirement accounts such as a 401(k) is an essential part of being in the workforce these days.

On the other hand, perhaps people in this part of the country will try their best to avoid retirement, because last year ranked Washington as the third-worst state for retirees. Basing their judgments on health care, crime, taxes, climate, and affordability, the website wrote, “Despite its stunning natural beauty, retirees might pass on moving to Washington state.” And if you’re thinking about relocating to a neighboring state to stay close to family and remain in the Northwest, well, Oregon ranked as the worst state for retirees.

We’re guessing that won’t deter most workers from aspiring to a healthy, happy retirement — something that is a relatively new notion in the scope of world history. Germany, in 1889, became the first country to offer a widely available state pension plan, and the United States established Social Security in 1935. Historically — and this is still the case in many countries — children would take care of aging parents in multi-generational households. Holes in the current safety net for elders could lead to a widespread revival of that practice.

“The first wave of under-prepared workers is going to try to go into retirement and will find they can’t afford to do so,” Norman Dreger, a retirement specialist in Germany, told the Associated Press.

That wave is arriving as the Baby Boomers move into retirement, and the impact will be a lingering one. Because of that, the federal government must maintain a diligent watch over the solvency of Social Security; more important, workers must plan ahead and save. The future will be here before we know it.