401(k) Specialist Issue 2 - 2020 - 15

401(k) BEST PRACTICES
Andrew Biggs is pushing back (hard)
against the latter, attempting to bring economic
sanity to what he sees as increasingly
hysterical claims of a " retirement crisis " that
will grip millions of seniors in despondency
and despair. He provides specific examples:
* " Retirees Might Run Out of Money 10
Years Before They Die " - Bloomberg
* " Americans Entering Old Age the Least
Prepared in Decades " - The Wall Street
Journal
* " Bankruptcy Booms Among Older
Americans " - The New York Times
* " Reliance on Social Security Near
Record High " - USA Today
'Poverty
rates among
retirees are
lower than
among workingage
households,
and they've
dropped
considerably
over the past
20 to 30 years.'
Biggs, former principal deputy commissioner
of the Social Security Administration,
current resident scholar at the American
Enterprise Institute (AEI) and Forbes
columnist, calmly recites stats and facts to
counter the shrill shouts. His admittedly
" impish " personality includes a healthy dose
of humor, and he adds one more supermarket
tabloid headline to the pile: " Bigfoot:
I'm Afraid to Retire! "
Humor aside, his argument is often met
with skepticism, so we challenged him
straight away. With dismally low savings
rates and millions of workers without access
to employer-based plans, how is this not a
retirement crisis?
" If you'd asked me 10 or 15 years ago
whether we faced retirement crisis, I might've
said yes, " he explained. " Conventional wisdom
is that Americans don't save enough for retirement,
401(k)s don't work, people don't participate,
fees are too high-the whole story. Part
of that is correct, but when you start pulling at
the threads of the retirement crisis narrative, it
tends to fall apart. "
'Crisis' Collapse
" Pulling at the threads " means an examination
of current retirees versus workers.
" Since 1979, the average retiree household
income has risen by close to 90%
above inflation, which is twice the growth
of salaries for working-age households. So,
retirees have gone from being a disproportionately
poor segment of the population to
a disproportionately rich segment. "
Gallup found that eight out of 10 retirees
have enough money not just to survive, but
to live comfortably. In the Federal Reserve's
Survey of Household Economics and Decisionmaking,
only 4% of retirees said they are
finding it hard to get by.
" Poverty rates among retirees are lower
than among working-age households, and
they've dropped considerably over the past
20 to 30 years, " he claimed. " So, there's no
retirement crisis for today's retirees. "
What about workers? How is their
preparation for retirement compared to past
generations?
" If you went back to the peak of defined
benefit plans in the mid-1970s, 39% of
workers participated in a defined benefit
plan, and many of those wouldn't collect a
benefit due to strict vesting requirements.
Today, Social Security Administration reISSUE
2 2020 | 401kSpecialist.com
15
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401(k) Specialist Issue 2 - 2020

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