Frontline’s – Can You Afford to Retire?: Catch it if You Can

For better or worse, U.S.- based employees are bearing greater risk for their well-being in retirement than ever before. At company after company, employee pension plans have either been scaled back, frozen, or liquidated in favor of employer sponsored defined contribution programs such as 401(k)s and 403(b)s. The fact is that defined contribution programs were never designed to be a primary retirement savings vehicle for the masses – and for many the reality hasn’t met expectations. A few excerpts lifted from Frontline’s website:

"I think this is a crisis in the making," says Alicia Munnell, director of the Boston College Center for Retirement Research. "I think 10 or 15 years from now, people who approach their early 60s are simply not going to have enough money to retire on."

"I would say, unless you're fortunate to be in the upper-income quartiles, that you're probably going to be in for a very rough ride," adds Jack VanDerhei of the Employee Benefit Research Institute (EBRI). You're not going to have sufficient monies to pay the predictable expenses - your housing, your utilities, your food -- plus the potential catastrophic medical care costs."

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. According to the U.S. Department of Labor, in 1978 workers put in only 11 percent of total contributions to retirement plans, while corporations put in 89 percent; by 2000, the employee share had leapt to 51 percent and the company share had fallen to 49 percent.

This is a must-see show for anyone saving for retirement. The issues are well-developed, the messages straight-forward. We see these issues first-hand each and every week – so we can assure you they are valid.

• Maybe 50% of the working population saves nothing.


• Those who do save simply aren’t saving enough. By the show’s expert’s estimates on average those who save only put away about 4% of pre-tax income. Yet one needs to put away between 15% and 20% of pre-tax income each year to have a good chance of meeting their post-retirement needs. We’ve come to similar conclusions independently.


• Most retirement savers make inappropriate investment decisions with their savings. Either keeping too much in money market funds or taking on too much risk through employer company stock.
  

You can view it online here. Let us know your thoughts.