You’re On Your Own

According to a recent article in the Economist, the U.S. is one of the leaders in having retirement income come from private sources (i.e., pension plans rather than government checks).  This could mean that our Social Security system is meager compared to many other countries, or it could mean that our industrial companies have traditionally been very, or perhaps, overly generous in the benefits paid out. 

Over the last decade or so, there has been a very strong trend in place whereby corporate American has moved away from defined-benefit pension plans based on earnings and years of service and toward defined-contribution plans like 401k’s, where the employee saves his or her own money and makes the investment decisions.  It’s an open question as to whether these defined-contribution plans at retirement will be able to supply anywhere near the same level of income as the traditional defined-benefit plans. 

Will American retirees simply make do with less?  If nothing else, it’s clear that retirement planning is more important than ever before.

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