In a recent CNN Money web interview, Meir Statman, Professor of Finance at Santa Clara University and a national leader in Behavioral Finance may have hit the retirement nail on the head; it might just be time for a mandatory system of saving for retirement.
Is it possible that we can require that people put money away to provide for themselves into and through retirement?
I think that it is. I think that we must. (See my blog post on the topic from a few months ago here.)
In a blog several months ago, I commented that we needed to revisit the world of "totally self directed" retirement plans. The irony is that we came into this world of self-directed plans because of the failure of corporations to adroitly manage their pension liabilities, a fate that killed the "defined benefit" pension system we were once under.
It's hard to argue that the world of 401(k) and 403(b) and all the other "self directed" plans have faired much better. At point of fact, corporate America was hurting financially (or so they claimed) in the era of defined benefit pensions. Truth is, that Americans are hurting financially in this one. Corporations, at least viable ones, are less apt to run out of money than people are. And, we don't need to fund a social safety net to take care of Corning if they start to run a bit low on cash.
Professor Statman duly notes that American's have an aversion to mandates. Clearly this mandate is one that we should find a way to get along with. American's are woefully behind on living a retirement based on their grandest wants and desires emerging as reality and long on the reality that life after work is less, often much less, than what they had envisioned it would be during all those working years.
Take at look at the article here and pay special attention to the chart at the end of the article which shows that on average, American's can only replace about 47% of their pre-retirement earnings. Hardly enough to have your retirement be the grand vision that you thought it would be.