Ever increasing numbers of Americans march toward retirement with little hope of maintaining their standard of living. The impact on our citizens, our economy and our national security could be catastrophic. —Ronald P. O'Hanley
With the Social Security system poised to fail and traditional pension systems disappearing, more and more current workers are completely unprepared for what comes next, argued Fidelity Investments head Ronald P. O'Hanley at a U.S. Chamber of Commerce speech in Washington, D.C., last week.
Americans have noted controversies surrounding the collapse of public pensions, with battles ranging across Illinois and Wisconsin to Oregon and California. And a handful of bankrupt cities like San Bernardino and Stockton, Calif., have highlighted the risks of overstretched pension funds.
Meanwhile, a handful of states and localities, with Utah at the forefront, moved pre-emptively to eliminate public "defined benefit" pensions and replaced them with "defined contribution" systems, with the risks shifted to the individual worker.
But lost in all of this friction over public pensions has been the fact that such pensions long ago disappeared in the private sector, and legions of American workers are now facing a future with guaranteed Social Security and without adequate savings plans.
“Ever increasing numbers of Americans march toward retirement with little hope of maintaining their standard of living,” O’Hanley said. “The impact on our citizens, our economy and our national security could be catastrophic.”
He cited a litany of statistics of the paltry savings of most Americans, including the fact that 35 percent of American workers have no work-based retirement program at all.
O'Hanley also called for improved financial literacy, and he condemned recent proposals, including the original Simpson-Bowles deficit reduction plan, which would eliminate tax deferrals for retirement savings.
"Eliminating tax deferral provisions of retirement savings is nothing more than a different form of borrowing. In this case, we are moving forward tax revenues from the future — and most likely lowering those revenues."
O'Hanley's warning echoes one from uber-hedge fund manager Stan Druckenmiller last month, one of the primary architect's of billionaire George Soros' investments.
Druckenmiller argued that the current generation of seniors is living high at the expense of their children and grandchildren. "While everyone is focusing on the here and now, there's a much, much bigger storm that's about to hit," he told Bloomberg Television. "I am not against seniors. What I am against is current seniors stealing from future seniors."
The warnings were buttressed by a recent study by the Transamerica Center for Retirement studies, which found that nearly half of working women have no retirement strategy at all, and more than half do not expect to retire.
"As women, we're so busy with our priorities day to day — whether they be family or work or some form of caregiving — that women are shortchanging themselves when it comes to planning for the long-term," Catherine Collinson, president of the private nonprofit foundation in Los Angeles, told the Huffington Post.
Eric Schulzke writes on national politics for the Deseret News. He can be contacted at [email protected].