Retirement planning looks difficult these days for people in their 30s with jobs -- even good ones -- that don't include an old-fashioned, defined benefit pension. Especially, considering the potentially precarious state of retirement programs such as Social Security and Medicare.
I spent the weekend visiting my son and daughter-in-law who live in the San Francisco area. They work hard and make what seems to me like generous salaries, but the cost of living is astoundingly high, especially compared to where I live in suburban Detroit. I was house hunting with them in an average neighborhood where two-bedroom bungalow homes sell for $600,000. How can anyone save money and pay that kind of mortgage?
My son said he was putting away 6 percent of his salary in his 401(k) and his employer is matching it, but he worries that he isn't saving enough. His wife works in retail and doesn't have access to a 401(k) plan. She's been putting money in an IRA, but it is growing slowly. Last year, the fees nearly wiped out any interest that her fund earned.
My son is convinced there will be no Social Security for him by the time he's old enough to claim it. I believe he's overly pessimistic, but I agree that it is the responsibility of the boomer generation to fix Social Security now, so it has long-term stability -- even if that means boomers get less than they had hoped. It's unfair to leave our children without this kind of retirement safety net, while expecting them to pay for our Social Security.
We also need to make simple retirement savings plans safer. Workers without employer-sponsored retirement savings plans need access to no-minimum-balance, interest-paid-on-the-first-dollar, low-cost retirement savings plans so under no circumstances does their retirement savings go backward.
Providing this kind of retirement planning help to our children may have some costs, but it is the right thing to do.