Americans' ability to build a secure retirement is increasingly in danger. In addition to Social Security's rapidly approaching fiscal problems and underfunded traditional defined benefit pensions, the retirement savings system is available to only about half of the work force and needs other improvements before today's workers can create sufficient retirement income. The longer this situation goes unaddressed, the greater the probability that millions of future retirees will face poverty or other financial hardships.
This is not a small issue. Social Security, the foundation of retirement income, is so underfunded that every retiree faces 25% benefit cuts in just more than 20 years. In addition, many taxpayers face massive tax increases to pay for underfunded state and local government pension plans. However, the biggest problem might be the retirement savings system, and the need to improve this crucial aspect of retirement security receives scant press and virtually no legislative action.
This is definitely not to say that the retirement savings system is so broken that it must be replaced. The fact is that the existing 401(k) system provides a solid foundation for retirement security. The growth of such features as automatic enrollment and automatic escalation has made it easier for millions more to participate and make appropriate investment choices. But the system does need significant reforms so that all Americans can have the opportunity to participate, be assured that they will have a comfortable retirement, and have the information they need to avoid nasty surprises.