Believe it or not, leaving retirement in the hands of individuals and the private sector is proving disastrous. Most middle-class Americans aren’t saving anywhere near enough for retirement. In fact, across the board, America’s approach to retirement is outdated.
And it didn’t just get that way: it has been since it was implemented. Today we’re looking at the ways America’s retirement system fails the American people, and what can be done to fix it.
While some of you are likely scratching your heads, others are nodding in agreement. A retirement based on investments and savings in the private sector is one that is out of your own control. Many institutions and professionals urge people to invest with them.
Analysts and experts sing the praises of retirement accounts, diversified portfolios and stocks. Meanwhile, the average American doesn’t have a fraction of the understanding required to make money through investing.
Investing is a full-time job. To understand the intricacies of how to make money through investing, one typically goes to school. The education required to succeed in that field is considered highly specialized.
In fact, accountants and bankers are rightfully considered sharp, astute individuals with numbers-oriented minds and superb focus. These are the people that can excel in the stock market.
Now, don’t mistake us here. “Normal” people, such as they can be said to exist, aren’t unintelligent. In fact, we’d argue that everyone has something to offer to the world by way of their unique knowledge and experience. However, for the average person, their body of knowledge doesn’t encompass the best strategies for making money through long-term investments.
As it stands, our systems expect the average citizen to have a very, very good grasp on stocks and investment accounts. The average citizen is required to save seven percent of their income from the time they turn twenty-five. That seven percent has to be wisely invested and not touched for at least forty years, if not more if it is to serve as a reasonable sum for retirement.
So, you might ask, what’s the issue? Tons of people have retirement savings and do just fine in this system. Surely, you’re being overly dismissive of the capacity of the average person! Well, while it’s true that some people do well and even flourish after retirement, let’s look a bit closer. The people who tend to have comfortable retirements are those people who were already quite wealthy before retiring.
Individuals who have been money-conscious their entire lives tend to have more comfortable retirements. This makes sense, of course, since those with more wealth know better how to manage it. However, it’s also skewed at a geometric rate, not a one-to-one correlation.
Those who are more well off before retiring are exponentially more prepared for retirement than middle-class citizens.
It might seem drastic, but the changes that need to be enacted are simple. A national, compulsory retirement fund that replaces 401 (K) accounts and employer retirement funds is a must. Just like private Social Security would never work, private retirement hasn’t been working.
It’s time for us, as a society, to come together and promise to take care of each other. After all, we all want to be comfortable in our elder years.