What Drives America’s Retirement Savings Challenge?
May 11, 2009
Let’s look at what’s driving America’s retirement challenge.
First off, we are living longer, far beyond the traditional retirement age of 65. But Social Security and defined benefit plans, which traditionally replaced a large share of preretirement incomes for the rest of a person’s life, are both shrinking. To be sure, their absolute dollar outlays may grow, but these programs are shrinking in terms of their ability to replace future retirees’ preretirement incomes.
I want to underline that metric — the ability to replace the income people make while working — because that is so clearly the best definition of the success or failure of any retirement system. And I’ll be coming back to it again and again.
As guaranteed income sources shrink, responsibility is steadily shifting to individual Americans, not only to save, plan, and invest to accumulate their nest eggs but also to convert those savings into lifelong income.
Most people clearly need guidance, maybe even guardrails, to enable them to shoulder these responsibilities. This is the key lesson that I believe we really must draw from the experience of workplace savings over the past generation and from the ever-more-detailed insights of behavioral finance.
Excerpted from a speech given by Robert L. Reynolds President and CEO Putnam Investments, at the 401KWire.Com Influencers’ Summit 2009: DC-IO Partnership Washington, DC May 6, 2009. The full speech is embedded below.
