Retirement in America: Navigating the Perfect Storm

When it comes to retirement in America, we’re sailing directly into a perfect storm.

Never before in human history have more people been looking ahead to more years of retirement. At just the moment that our largest generation, the baby boomers, is entering its golden years, it is becoming harder for Americans to save for retirement.

Right when more people are jumping in the boat for a longer period of time, it’s springing some leaks. In recent decades, the nation has experienced a dramatic shift in how Americans save for retirement. It used to be that you retired at age 65 with a defined benefit pension plan that you couldn’t outlive. As recently as 40 years ago, that was the case for about three-quarters of workers participating in a retirement plan. In 2012, that number is down to 30 percent, with the rest navigating the uncertainty of 401(k)s and IRAs, which are vulnerable to market volatility and require workers themselves to manage their own assets.

This storm is creating choppy waters for people who want to enjoy time with their grandkids after a lifetime of hard work. Many Americans nearing age 65 are ready for retirement, but their wallets aren’t. The nation’s aggregate retirement savings deficit — the difference between what people have saved and what they will need — is at least $6.8 trillion and possibly as high as $14 trillion.

This problem is especially acute for women, who live longer and earn less than men on average.

Moreover, many women spend their prime earning years either working part-time — or they leave the workforce entirely — because they are more likely to stay home as family caregivers. That means they’re paying less into Social Security, and they have less money from which to build a nest egg. In fact, women older than 65 are twice as likely to live in poverty as their male peers.

But the retirement crisis is not an unsolvable problem. Congress can take some important steps to make a powerful difference. Passing the Paycheck Fairness Act, designed to close the gender pay gap (women earn 78 cents on the dollar men make), would boost wages for women and help close the retirement savings gap. Increasing the national minimum wage would give millions of workers a raise, helping them put away more for retirement and increasing their Social Security contributions. President Barack Obama’s recently-proposed rule to expand overtime pay to nearly 5 million workers would have a similar effect. Of course, Social Security is the cornerstone of a secure retirement, and Congress should work to strengthen it for seniors today and for future generations. For example, there is proposed federal legislation that would make targeted updates to Social Security to help seniors access more stable financial footing in retirement.

The president has recently taken important steps in the retirement security space, to promote access to savings and also to protect consumers so they can make informed investment decisions.

About one-third of workers do not have access to a retirement savings plan through their jobs. States such as Washington, California and Illinois are stepping up with innovative solutions to this problem, but many state leaders are concerned about a lack of clarity as to whether their proposals would be pre-empted by the federal Employee Retirement Income Security Act. So earlier this month at the White House Conference on Aging, the president directed the Labor Department to develop a new regulation that would clarify how states can move forward, reducing their litigation risk and paving the way for more workers to save more for retirement.

Retirement security goes to the heart of what it means to be middle class in America. Our middle class is only truly strong when hard work is rewarded, even after your working years are over.

That principle inspired President Franklin D. Roosevelt to sign the Social Security Act 80 years ago this summer. It was the idea animating President Lyndon B. Johnson’s push to create Medicare 50 years ago this month. Now it is our turn to meet the retirement challenges of a new generation, to give people the tools to chart a successful course through that perfect storm.