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‘Keep Calm and Muddle Through’ Wrong Solution to Retirement Crisis

Most all of us know someone—or may even be someone—who worries about having enough economic strength through savings, pensions, Social Security, health insurance and other resources to retire. When the paychecks stop coming in we don’t want to rely help from our families, drastic cuts in spending or be forced back to work.

We’re right to be worried because a growing number of studies and economists show that most working families are not prepared to retire, in fact, many say we're a facing a retirement crisis. A new report from the Center for American Progress (CAP) says that if we ignore the retirement crisis—something the right wing and Wall Street say we should—it will leave middle-class Americans with little economic control of their golden years and they will be forced to simply muddle through.

The study’s authors—Christian E. Weller and David Madland—point out that the share of inadequately prepared households rose from 31% of working-age households in 1983 to 53% in 2010. They note that:

Much of the academic research on retirement income adequacy finds that a large minority, and possibly even a majority, of households will not have enough money set aside for retirement. That is, people will have to cut back on their dreams, their consumption and their time in retirement, perhaps by working in their current jobs longer than they had anticipated. 

They also write:

Even studies that that conclude that the overwhelming share of households are adequately prepared for retirement rest heavily on the assumption that retirees can and will make adjustments to their standards of living by working longer, spending less and gaining access to public assistance. Put differently, assuming that households want to be in economic control of their retirement identifies a serious savings shortfall, while elevating “muddling through” as a guiding principle for retirement policy leaves only a small share of retirees with serious savings shortfalls.

Here are other key points:

  • Few people feel confident about their retirement prospects. 
  • Most households are at risk of having to scale back their living expenses in retirement.
  • Retirement savings shortfalls vary expectedly across subpopulations. Nonwhite households, single women and households with less education are much more to be inadequately prepared for retirement.
  • Painting a much rosier picture of retirement preparedness assumes that retirees will somehow muddle through retirement. 

Weller and Madland write that policy can strengthen retirement preparedness. 

Previous generations were better prepared for retirement than current generations in part because today’s working-age households have not increased their savings enough to compensate for slower growth in Social Security benefits, disappearing defined benefit pension, or DB pensions, and rising financial risk exposure. [Along with boosting Social Security benefits] policymakers should make it easier for people to save, strengthen savings incentives and help households better manage their investments.

Read their full report here.

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