The Retirement-Readiness Disconnect: Financial Advisors' Daily Digest

By SA For FAs :

One of the key sources of the pension crisis is the unrealistic return assumptions managers make. Were more realistic return assumptions made, plan participants would have to make higher contributions and governments would have to raise taxes to keep goals or promises on track. In a world of "fake news," this fake fuse - wherein we all sort of pretend that pensions are sounder than they are - suits a society that would not lightly accept a raising of the retirement age or mandatory higher contributions.

In his article " Retirees Face a 'Pension Crisis' of Their Own ," Lance Roberts makes the point that what is true at the government and corporate levels is no less true at the individual level. The point seems unarguable. Americans are not eager to raise their own retirement age by working longer - taking Social Security early is the most popular claiming strategy.

And substantial, widespread underfunding is a clear indication that people are not stepping up their own contributions. In many areas of life, there is a disconnect between what people know to be a problem and what they do about it, but the chasm in retirement readiness is particularly pronounced given that this is an issue people actually care about profoundly!

Roberts suggests seven points individuals would do well to consider. I quote:

Personally, I would emphasize his second and fifth points the most. Increasing your savings and leaving a reserve that can be used in down markets can diminish the impact of the other problems, and they don't require any kind of deep thinking. You can set up automatic savings plans, and segregate cash or cash equivalents in a separate account, and you're good to go.

But "advanced" investors interested in bridging the disconnect would do well to look into their employer retirement plans, any pensions they might have and their Social Security accounts , to ascertain how they work, how exposed they are to the gathering storm and what they might do about it.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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