Individuals are on their own as they save for retirement; some people do a great job while others need a push to get going. Without some prodding, millions of workers could be headed for a retirement catastrophe, and that could have wide social implications.
Most people aren't great at saving
According to the Bureau of Labor Statistics, in March 2013, 64 percent of workers in private businesses had access to retirement benefits, though only 49 percent of private workers participated in retirement plans.
People without a workplace plan can open an individual retirement account, or IRA. Most don't; however, close to 4 in 10 households owned an IRA in 2013, according to the Investment Company Institute, a trade association for the fund industry. And rollovers from workplace plans accounted for the IRA assets in nearly half of those households.
The retirement support provided by private savings is flimsy. According to the Commerce Department, the personal saving rate is just 3.9 percent of disposable income. The personal saving rate peaked at 17 percent in May 1975 and cratered at 2 percent in July 2005.
How will entire generations manage to retire on reduced Social Security payments and crumbs from disposable income? Unless something changes at the national, community or individual level, it's not going to be pretty.
Employers aren't taking charge
America's retirement system earned a grade of C in the 2013 Melbourne Mercer Global Pension Index, which ranks 20 countries around the world on the adequacy of retirement benefits, sustainability and integrity.
Other countries have made great strides in solving their retirement puzzles: that is, ensuring all workers have enough money to retire successfully. But their solutions may not be a panacea for everyone.
Nine countries studied by Mercer scored above a C, including Denmark, the lone country in the group that scored an A.
The retirement systems in the Netherlands and Australia both earned a B+.
All three countries have a mandatory, or a partly mandatory, workplace component to their retirement systems. That means employers must contribute to the retirement savings of their employees. Nearly all of the workforce in Australia and the Netherlands, 95 percent, are covered by workplace retirement plans, according to a 2013 study by the National Institute on Retirement Security.
"That may be where we end up, but mandates are not the most favored thing in Washington these days," says Rob Austin, director of retirement research at Aon Hewitt, a human resources consulting firm.
Anthony Webb, senior research economist with the Center for Retirement Research at Boston College, agrees. "I don't see a mandate fitting into American cultural norms," he says.
The government tries to help -- a little bit
Clearly, herding everyone into fully funded retirement is a thorny issue. In his State of the Union address in January, President Barack Obama introduced a plan to get Americans to save. Called a myRA, it's like a Roth IRA with training wheels.
- Contributions made after taxes
- Withdraw contributions free of tax
- One principal-protected savings bond to choose from
- Initial investment as low as $25 with subsequent contributions as small as $5
- Contributions made via payroll deduction after employee opens the account
- Starting with a pilot program at the end of 2014
The White House also promised to continue working with Congress on the Automatic IRA proposal. Workers not covered by an employer-sponsored plan would be enrolled automatically in an IRA with payroll deductions.