We have a new "awareness" week on the calendar: Oct. 18-24 was "National Retirement Security Week," thanks to Senate Resolution 263, which was passed on Sept. 22. As a proponent of financial literacy, I'm all for raising public awareness of the need for everyone to achieve retirement security.
The Senate has these objectives: 1) raising public awareness of the various tax-preferred retirement vehicles, such as IRAs and 401(k) plans, 2) increasing personal financial literacy—- an absolute must, and 3) engaging people on the keys to success in achieving and maintaining retirement security throughout their lifetime. These are all worthy goals.
When the National Institute on Retirement Security (NIRS) surveyed people about their views on retirement security, they found that an overwhelming majority (86 percent) believed we were in the midst of a retirement crisis. That is a pretty strong sentiment.
People over age 55 have limited financial resources and low participation rates in retirement plans, according to a May 2015 U.S. Government Accountability Office (GAO) report titled "Retirement Security."
About 1/2 of households age 55 and older have no retirement savings accounts. About one out of three households in this age band do not participate in a pension plan or any retirement plans. For them, Social Security retirement benefits and savings are essential for a secure retirement.
Of those who participate in retirement plans, about one of two have about $109,000 saved, which translates into a monthly benefit of $405 (inflation adjusted) for a 65-year-old, according to the GAO. That's hardly enough.
It's not surprising that "Three in four Americans remain 'highly anxious' about their retirement outlook and are concerned about their ability to achieve secure retirement," quoting NIRS.
Hopefully we can do a better job to engage people in preparing for a more secure future. How can we make that happen?
First, let's start with definitions.
"Retirement security" means different things to different people. Here are some examples, as reported by NIRS:
• "Being able to have a house to live in and food to eat."
• "The relief of not worrying about not having money to pay bills, buy groceries or medicine in my old age."
• "Being able to retire without seeking employment or additional income."
• "[Being able] to live at the same standard while I worked and not have to take another job."
• "Being able to pay your bills without going for government help. Being able to go where you want and having gas in your car. Being self-sufficient."
• "Where I can live month to month with money coming in so I can afford the expenses that I have."
No matter what your definition of retirement security, it pays to become knowledgeable in order to plan ahead. Making that happen may be stumbling block for some, however.
A recent survey sought insights on the motivation of workers age 18 and up to learn about saving and investing for retirement. Titled "16th Annual Transamerica Retirement Survey: A Compendium of Findings About American Workers" (August 2015), it found that 22 percent said "nothing" would motivate them to learn more, either because they are already educated enough or are just not interested in the topic.
Thirty-seven percent said they would be motivated by larger tax breaks or saving incentives. Thirty-four percent cited educational materials that were easier to understand. Thirty-four percent said that they would be motivated by "a good starting point that is easy to understand."
This is a good week to focus on financing retirement, even if you are decades away from that life transition. Write to me (readers@juliejason.com) about your challenges, goals and timeline. I'll incorporate your thoughts into a series of columns that will focus on practical steps to get you started on the right track. I'd also like your thoughts on the type of educational programs that might help you or the company you work for. If you are involved with an association or foundation that focuses on promoting financial literacy, let me know.
Next week, we'll come back to the topic of compensation in the financial-services industry, focusing on recruitment bonuses.
Julie Jason, JD, LLM, is a personal money manager (Jackson, Grant of Stamford, Conn.) and award-winning author.
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