Regular readers of these pages know that rising pension costs are draining state and local treasuries, creating crushing long-term liabilities and leaving fewer dollars available to fund basic public services.
Yet as government agencies are forced to devote more resources to unsustainable and overly generous pension promises to their employees, a very different kind of retirement crisis is looming for people who work in the private sector. About half of all Americans employed outside government have virtually no retirement savings.
A declining number of companies offer traditional pension plans, and an increasing number don't offer or have ceased contributing to tax-deferred savings plans. In California, only 45 percent of private-sector employees work for companies that offer retirement benefits.
Aside from payroll withholdings for Social Security, which pays an average of $1,269 a month, millions of people set aside little or nothing on their own.
By some estimates, the difference between U.S. household savings and the amount people need to maintain their present standard of living in retirement is at least $6 trillion.
That isn't so surprising considering that the incomes of middle- and working-class families have been stagnating for a generation. People living paycheck to paycheck aren't in any position to build nest eggs for their retirement years.
But they can't stop the passage of time either.
Every day, roughly 10,000 Americans turn 65. By 2030, when the last of the baby boom generation reaches retirement age, one in five Americans will be at least 65. Today, it's about one in eight.
Without adequate savings, many baby boomers will have no choice but to continue working. To retire, others may settle for a drastically reduced standard of living.
The problem is obvious. The solution is not.
Just as most of the actions aimed at curbing the cost of public-employee pensions have produced only marginal savings for taxpayers, the most prominent proposals to assist private-sector workers would have limited effects, at least for people approaching retirement in the next decade.
In his State of the Union address, President Barack Obama announced MyRA, a variation on existing individual retirement accounts. MyRA would include automatic payroll deductions, with returns tied to the yield on government debt, guaranteed principal and no fees.
But participants would be limited to $15,000 in savings, which wouldn't get anyone very far in retirement. Anything larger would require congressional approval, and Obama's previous retirement proposals have languished in Congress.
California also is taking steps to create a savings program, dubbed Secure Choice, for private-sector workers who lack employment-based retirement savings benefits. Initial assessments of the program are promising, although there have been complaints about state government competing with private retirement services.
The biggest obstacle to saving for retirement is insufficient income. Neither of these plans change that. But they would make it easier to save, which might get some people started on the path to a comfortable retirement.
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