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Americans want pensions

By Barbara Whelehan · Bankrate.com
Friday, March 1, 2013
Posted: 2 pm ET

A new study released this week reveals that 85 percent of Americans are anxiety-ridden about their retirement prospects. And 84 percent say all Americans should have a pension.

What's not to like about pensions? To ask Americans if they like pensions is equivalent to asking if they like babies. Of course they do. Pensions would be a good solution to everyone's retirement planning problems.

"What people tell us is they don't feel they can do it on their own," says Diane Oakley, executive director of the National Institute on Retirement Security, or NIRS, which sponsored the study.

The study's release coincided with bad pension news this week from other quarters.

The Wall Street Journal came out with a splashy headline Tuesday: "Why the corporate pension gap is soaring." The story explains what's behind a $347 billion funding gap in private sector pensions. That figure represents "the gap between the amount that companies expect to owe retirees and what they have on hand to pay them," according to the article.

Separately, global consulting firm Towers Watson reported a similar dismal finding this week -- that at the end of 2012, the aggregate funded status of pensions at 429 Fortune 1000 companies was the lowest recorded in 13 years, despite strong market gains. Liabilities grew more than assets.

And Mercer, another global consultant, announced the launch of its U.S. Pension Buyout Index to provide companies with timely pricing information -- just in case they want to get out of the pension business and shift their pension burden to third-party insurance companies.

Pushing for retirement security

Undeterred by these developments, NIRS' mission is to convey the importance of retirement security to policymakers in Washington, D.C. It has a sympathetic ear from Sen. Tom Harkin, D-Iowa, who last summer introduced a newfangled pension solution called Universal, Secure and Adaptable Retirement Funds, or USA Retirement Funds. Though it didn't get much pickup in the media, it deserves a lot of attention because it addresses an important need: Most Americans are woefully unprepared to finance 25 to 30 years of retirement, particularly as health care costs rise. They could use some help.

Oakley says she looked at some figures from the Survey of Consumer Finances from the Federal Reserve recently to see how many people have saved up enough in the 55 to 64 age group -- those approaching retirement. The rule of thumb, depending on the source, is that people should have a multiple of anywhere from eight to 12 times their annual household income saved up before retiring. Oakley looked at how many had just four times their household income. "Only 12 percent of the households have that kind of savings," she says. In the 45 to 54 age group, only 4 percent have that much saved, she adds.

Another big finding in the NIRS study, she says, is that 95 percent of millennials believe the retirement system is broken, and 84 percent would be supportive of a new pension system like the one proposed by Harkin.

Ironically, it's the millennial generation that could benefit the most by investing in their workplace plans or an individual retirement account right now -- without delay. They have the benefit of time on their side to reach their retirement goals if they make use of these tools.

It's a good backup plan -- just in case the USA Retirement Funds don't materialize.

***

Follow me on Twitter: @BWhelehan.

Barbara Whelehan is a co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters. It is available at Amazon, Barnes & Noble, iBookstore and other e-book retailers.

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2 Comments
Jimmy jones
March 01, 2013 at 4:10 pm

So I have the opportunity to lock my USDA loan TODAY 2/1/13 at 3.5%. However, the rates have been dropping the past 2 weeks. Im considering holding out till next week to try and get a little lower rate. Anyone have any advice?
Other than "dont get greedy"

Thanks !!