The Retirement Crisis

There is an impending retirement crisis in the United States. Most experts feel that for a comfortable retirement one needs to have a structure that provides 80% of pre-retirement income. In the past, this was achieved using the “three legs of the retirement stool” – private pensions, personal savings, and Social Security. However, today these “three legs” are much different than they were in the past. Previous generations could rely on all three to maintain a relatively high standard of living in retirement, this is simply not an option in today’s world.

In 1990, Social Security replaced 43.2% of pre-retirement income of the average worker. This is expected to fall to 3.7% by 2030 (USA Today 7/19/2002). A recent survey found that 41% of Americans believe there will be no Social Security when they retire, and 31% believe they will at the very least have reduced levels of benefits (CNBC.com 5/22/2015).

Recent studies have found that 68% of American workers do not participate in an employer sponsored retirement plan. This number includes 53% of American workers who do not have a plan available to them, and 15% who are offered a plan but decline to participate (Forbes.com 4/9/2015).

The state of personal savings is perhaps the bleakest of the three legs. A study by Bankrate.com found roughly 50% of Americans lack the savings to cover 3 months of expenses and 27% have no savings at all (Money.CNN.com 6/24/2013). A whopping 76% of Americans are living paycheck to paycheck with no safety net and no plan for retirement (Money.CNN.com 6/24/2013).

What does all this mean? The statistics listed in the previous paragraphs paint a disturbing picture, however the most recent Retirement Confidence Survey, put out by the Employee Benefits Research Institute, finds that 22% of American Workers are “very confident” about having enough money for retirement and 36% are “somewhat confident” (EBRI.org, 4/2015). In reality, 54% of Americans approaching retirement have too little saved to produce an income stream (Forbes.com 4/9/2015). Many “retirees” will find themselves working well into their retirement years. American workers need a reality check.

So if you are an employer, why offer a retirement plan for your company? Our firm designs plans that offer significant tax benefits to the employer. As a small business owner or sole proprietor you may have enough personal savings to rely entirely on that leg of the retirement stool in the future, but our plans may provide you with significant tax savings right now.

If you are an employee, why consider enrolling in a plan? At this point it is up to the individual to provide for his or her own retirement security. If an employer offers a retirement plan, it is imperative that employees take advantage of the opportunity to put money away for retirement. Even small amounts can make a difference in the long run. This is one of the reasons we recommend automatic enrollment in our defined contribution plans. 

Our role in fending off the crisis is to create plans for small businesses, sole proprietors, and professionals that provide a significant tax benefit to employers now and an opportunity for employees to have a significant retirement benefit later.

Our custom designs are tailored to each client’s individual need.

Contact us today to find out how we can create a plan that’s right for you.