The state of pensions and future retirement is well know. The warning signs are all around us. A combination of inaction, financial illiteracy and the simple inability to save is taking society in a risky direction.
The inability to retire will change the dynamics of the workforce and add to costs for employers. Inadequate income will cause greater pressure on Social Security and other government programs and inadequate income will also stress consumer spending, perhaps increase bankruptcies all of which are not positive for business. The irony is that many employers are shooting themselves in the foot, often for short-term gain or to satisfy sort-term goals such as EPS.
The following quote caught my eye. Interestingly, here they are talking about Canada, but it doesn’t matter, the same situation exists in the U.S. as well.
However, retirement income is only part of the story (at least in the U.S.). For pre-65 retirees, the cost of health care poses an additional challenge, especially with the relatively few employers that did provide coverage rapidly abandoning the benefit.
Ready for more bad news? Employers are shifting more and more health care costs to active employees. This leaves less available for retirement savings. It appears health care is becoming more affordable for some while life is less affordable.
Is anyone thinking long-term? Employers have a long history of doing dumb things that eventually lead to even dumber laws and regulations. The current retirement situation may be the best example of all. Let’s hope the additional EPS is worth it…. but we all know it isn’t.
Those of you who abhor deficit spending and government stimulus to generate demand and spending in the economy should keep all this in mind. 👀
According to a survey by Aon Hewitt (a risk management consulting company), the health of defined benefit pension plans in XXXXX is at its highest solvency ratio since September 2007. Funding ratios for XXXXXs largest pension funds reached 97 per cent in 2013.
But employers are still using the financial crisis of 2008-09 to demand not just changes to pension plans, but to exclude new employees from decent pension coverage and, in turn, a defined retirement income.
This means the retirement crisis is about to get bigger as young people are told in a multitude of ways that they are on their own when it comes to retirement security, that they should not expect the same as their parents, that they should lower their expectations all together.