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How Would You Fix the U.S. Retirement System

Category: Retirement Planning

January 20, 2014 — It’s the beginning of the year so it must be time to prognosticate about what’s to come and how we might make things better. We have seen several thoughtful pieces along this line, including one from our colleague over at MarketWatch, Bob Powell (“New Laws, Regulations the Experts Want for 2014“).

In this article we are hoping to get our loyal members and readers to reflect on the planning that went into their retirements. Who else is more qualified to talk about retirement than you folks – you are the ones living it now. Do you think any of these proposals would work, and do you have any of your own? We look forward to your reactions and suggestions in the Comments section below.

Something Needs to Be Done
Here at Topretirements we regularly hear from members who are struggling to make ends meet in retirement. There are any number of figures that point to a looming retirement crisis for Americans:

– According to the New York Times 58% of U.S. workers are not included in a pension or 401(k) plan. – In 2010, with the economy still in recession, The Center for Retirement Research at Boston College found that 53% of people age 65 were “at risk” for not having enough money in retirement to maintain their current lifestyle (and it has gotten worse – the figure was 44% in 2007).
– Too many workers either withdraw part of their savings before they retire. Many others spend it too quickly in the first years of retirement.
– Social Security, which provides a paltry average of $15,000 per recipient, makes up at least 90% of the retirement income for a third of the people receiving benefits.
– There are currently 2.8 workers for each Social Security beneficiary. By 2033, there will be 2.1 workers for each beneficiary.

These are some of the solutions to the crisis from here and there. Some come from other countries, including the highly successful Australian system. We have tried to balance the ideal for retirees to have enough income to enjoy retirement, with the reality that there is no free lunch – somebody has to pay for everything we get.

Mandatory 401k Contributions. Some might say this is big government, and in many ways it is. But since most people can’t seem to manage saving enough on their own initiative, somebody has to make them do it. Social security alone does not provide an adequate amount to live on – it was planned as a basic safety net, not more. Chile and Australia require mandatory contributions (10% and 9% respectively) to a 401(k)-like fund, and those programs seem to be working well. This requirement would have 2 parts: all employers have to provide a 401(k) plan, and all workers have to participate to at least some minimum degree.

Required Annuities. This proposal might even be more controversial. But, unfortunately, there is an alarming number of retirees who take their retirement savings in a lump sum – and then spend it so fast they are destitute in their 70s. If there was a requirement to take some portion of our 401(k) or IRA savings as an annuity, many people would be saved a life of poverty in their oldest years. For this reason the Netherlands requires that a portion of retirement savings be converted into an annuity.

Retirement should mean dream vacation trips

Retirement should mean dream vacation trips

Make it more difficult to take Social Security Benefits before Normal Retirement Age (66 for most people). One idea is to require a waiver that the recipient acknowledges they are giving up a significant future benefit by taking it early. Or more draconian, gradually raise the age that we can start collecting from 62 to 66.

Require Spousal Approval for Early Collection. Since it is women who tend to be victimized by a spouse who takes the benefit early, require a spousal consent form for any married person taking their benefit early. The rational for this is that since women tend to live longer than their husbands, smaller spousal benefits condemn them to a live of poverty in their old age.

Restrict Early Withdrawals. 401(k) recipients can usually borrow from their own balances. But doing this normally has a great negative impact on future retirement. There are many reasons, such as the education of a child, that are permitted reasons now. By making it more difficult to withdraw savings, more people would enter retirement with a meaningful balance.

Fix Social Security and Medicare for the long term. Both programs are popular and fulfill important needs. But both are in serious need of reform if they are to stay solvent. No President or anyone in Congress seems to have the stomach to work on the problem. There are solutions: like delaying benefits, increasing contributions, changing the inflation formula, or reducing the benefits to higher income people. Maybe you have an idea. But somebody needs to work on the problem instead of ignoring it.

Comments? What worked, or didn’t work, for you in your retirement planning? Is there something you could have done differently, or a corporate or government program that would have been helpful? Please let us know in the comments section below.

For further reading:
How They Do It Elsewhere (excellent NY Times article profiling how other countries manage retirement funding)

Posted by Admin on January 20th, 2014


  1. There’s no solution. We all make mistakes, some reasonable – some capricious; there’s no system that can make us all whole,(without stealing from those who are more financially stable), least of all yet another government mandated one.

    by dan — January 21, 2014

  2. There is no sense in reinventing the wheel when it comes to retirement income. Other countries are better at this than the U.S.A. Some of what these better performers do should be done. We do not educate our population financially so it is no surprise many people do not have enough money in retirement.

    by Rick — January 21, 2014

  3. I think the present system is fine. I chose to save up to 25% of my salary while working, so now I have a comfortable requirement. Others chose to spend all the money they made and then some (credit card debt, large mortgages, a new car every year or two). People need to learn to be responsible for their choices. You cannot legislate responsibility. And there is no way to provide a comfortable retirement for those who will not prepare for it without robbing those who did.

    by Linda — January 21, 2014

  4. Stop using Social Security money to finance Federal debt. Check out for your self what portion of the debt is financed by citizen money.

    After we curtail borrowing from Social Security we can then address some of the fundamental flaws by changing the system.

    by Tom — January 21, 2014

  5. I salute those who through hard work and discipline who have put themselves financially into a position where they can retire comfortably. I am blessed to be in the same position, but I would also add that along the way I had a little luck too – no catastrophic injuries, no relatives who had to be rescued, good bounces in my career too. The point that I think those who are concerned about being “robbed” are missing is that systems like those in Chile and Australia are designed to make those who don’t have the discipline to save do so. The point is that in a mandatory program like those there is no robbery, everyone is going to retire on their own money. My opinion, anyway.

    by Bob — January 21, 2014

  6. A lot needs to be considered…no one size fits all however. People who dig ditches all their lives for low pay may not physically be able to wait until 66 to take social security. Those who save a larger percentage of their incomes for retirement probably make more. All of us would love to be able to save 25-30% of our income, but we also must pay bills and eat. Living in a high cost area of the country–means more to live and less to save. Foreign countries provide retirement for their citizens. Finland takes care of the most vulnerable the young and the elderly. I am convinced that if through taxes our pension and healthcare were taken care we could live well–France does a nice job of it as well as the Nordic countries.

    by Jennifer — January 21, 2014

  7. Johnson took our SS and gave it away for votes, ie, the war on poverty and never paid it back. The average SS payout of about 1200 $ would be more than double if SS was left alone, yet we still have the poverty. Foreign countries tax the citizens 50% or more to finance their retirement and health plans. France is in a financial bind and cannot aFford to continue their health plan as is.”Nordic countries” do better because virtually everyone contributes, something that has not happened here and never will.

    by Jeff — January 22, 2014

  8. It’s no surprise to me that people (retired or not) spend their 401K. Our entire society is based on consumerism “buy, buy, buy, NOW!!!”–on credit of course, so people spend more money than they should. We need to change the philosophy—don’t keep buying things you don’t need (e.g., a new car every year or two, as Linda mentioned above). However, it is still the norm to have 3 – 4 children per family, and it’s really tough to adequately support and educate that many during their growing years, so there is less time for the parents to accumulate savings after the kids are grown. Personally, I don’t see any alternative to two things: (1) Stop the government from borrowing from the Social Security fund; (2) Mandatory contributions from all workers into a 401K (or similar plan) and no money to be withdrawn before retirement except in the case of terminal illness.

    by Marge — January 22, 2014

  9. Can you imagine what everyone would have in the bank if the government didn’t steal it? Also, if they allowed us to save it ourselves, when a spouse died the savings would still be there in the bank for us. The way it is now, the government takes the spouse’s savings when they pass away. You only get yours even though the spouse put his/her own money into SS while working. It goes away if you have SS too.

    by marilyn — January 22, 2014

  10. We need a mandatory portable national pension system where everyone has one wherever they work, contributions are made by both workers and employers, and it’s invested in an asset allocated portfolio of Global Index Funds across multiple asset classes. In retirement, the proceeds should be used to purchase a lifetime annuity for the individual and their spouse.

    by JB — January 22, 2014

  11. I live in New Jersey. This states Governor is determined to run for President on the back of NJ taxpayers. I am out of NJ as soon as I retire. The 6% state income tax plus multiple state fees including mandatory car insurance that is the national highest makes this state not for retirement. 😡

    by John Mc carthy — January 22, 2014

  12. We certainly won’t go back in time to restore the money that was taken from SS to fund other government programs. Let’s make sure that Congress keeps its mitts off SS in the future. Most importantly remove the wage cap on SS contributions so that high earners contribute their fare share as well as their employers. Secondly, increase funding for SS/Medicare/Medicaid fraud detection and vigorously prosecute those who are abusing the system.

    by setabt — January 22, 2014

  13. I have no problem with making contributions to retirement plans mandatory for those who work. Contributions to their retirement plans with their money. I do have a problem with asking me to finance their retirement. I was a single mother of two children working as a secretary. I managed to put both children through college and save money for retirement. I chose to make that a priority. Other people chose debt, lavish lifestyles, expensive vacations, etc. Fine. That’s their choice. Now they need to live with the consequence of their choices.

    by Linda — January 22, 2014

  14. Retirement is a life long plan. You must learn financial discipline. Too have anything mandated by government is ridiculous. After all, this is an entity who spends and has no discipline whatsoever. It takes sacrifice. Whenever and wherever, you must resist the temptation of purchasing items when you do not have the money. I invested early with aggressive allocation and gradually modified to a 60/40 blend. Keyword is diversify.
    I invested in 50% of portfolio on annuities with a guaranteed life income rider. I worked with an advisor to make sure I selected an annuity best suited for my needs. Most of all I retired with no debt. No mortgage, no tuition and no huge credit card balances. Finally, I created a budget and have kept to it.

    Electing social security at 62 or 66 is an individual choice based upon your financial need. I, for one, calculated my breakeven point and felt I wanted my money at 62.

    Remember it is an individual choice! The government wants you to be dependent upon them. You can not put people in a bubble and think you can protect them.

    If you do not have skin in the game, you will certainly be more careless.

    by Joe — January 22, 2014

  15. I believe there needs to be some mandatory requirements. This is the same argument for mandatory health care payments. If some choose to opt out, there should be a penalty. This is a society and we will end up paying for those who are unable or unwilling to plan.

    by Bill Clark — January 22, 2014

  16. Linda, congrats on getting your kids through school and saving for retirement. Good for you. But don’t be so quick to condemn others until you have walked in their shoes. Not all of us who are worried about our money running out are in this position because we lived lavishly or squandered our money on the here and now.Luck plays a part, as others have noted. A catastrophic illness that exceeds your insurance limit, long term joblessness due to layoffs and downsizing, a family member who needs an organ transplant can consume your savings in a heartbeat. A few things that might make the paltry SS check go further: make SS payments tax free at all levels. Allow early retirees to earn as much as they can without being subject to the current cap of around $14000 a year. Stop corporate welfare that allows Exxon, General Electric, and countless other companies to pay NO taxes, and in fact, to get rebates from the government. Make them pay their fair share and we all win…not just retirees but young people struggling to make ends meet and raise their children on wages that have gone stagnant for years while the top one percent of Americans grow richer and richer. Provide incentives for medical personnel to adopt procedures and programs that can limit outrageous medical bills. Make a concerted effort to explore innovative, affordable, and appealing housing options for retirees so that most of their monthly check is not going to keeping a roof over their heads. Members of my parents’ generation worked for the same company for 30 years, retired with a gold watch and a pension, and a mortgage that was paid in full. Our generation has struggled to get employed and stay employed, and that struggle has meant moving to different cities and starting over.A smaller percentage of retirees now own a home mortgage free. Suitable housing is the biggest worry, after medical costs— for those who have not been lucky enough to stay put and pay off a mortgage.

    by Doro — January 22, 2014

  17. It’s a very complex question. However, I would start by eliminating early withdrawals from 401(k) and 403(b) accounts and eliminating early payouts from SS. Second I would dramatically increase the SS contribution limit on income. Higher income earners already have the lowest tax rate in generations and contributing 7% of their high incomes to SS would not change their lifestyles. A huge mistake would be an attempt to privatize SS.

    by Tom — January 22, 2014

  18. Retirement is getting harder due to the economy. I believe changes need to be made. I feel companies that you have worked for should not be able to increase your contribution for medical expenses, or there should be a cap on the amount the can increase it each year. Without this, saving for retirement gets harder and harder and sometimes impossible. You are, or will be making less, so the bills can’t be increasing each year.

    by Irene Hinojosa — January 22, 2014

  19. The government has done a poor job for years educating people about SS as it exists now. Some people see it as a retirement fund…it is not. It is a safety net. It is nearly impossible to retire solely on SS…other investments must be made. Americans have been sold a bill of goods with 401K accounts, as there are too many restrictions on contributions. It was mentioned that in the past people retired with a gold watch, handshake, and a pension. There is nothing to prevent that from happening again if there weren’t so many incentives for corporations to eliminate pensions and pay CEOs and other officers big bucks for doing so. We have been duped since the early 80’s and it’s getting worse.

    by jay — January 22, 2014

  20. 1a. Extend earliest retirement to an actuarily appropriate age (70?).
    1b. Raise age of earliest withdrawal to an actuarily appropriaste age (68?).
    2. Hold SS trust fund monies in interest bearing accounts.
    3. Do not allow Feds to borrow/use SS Trust funds.
    4. Require Feds to pay back interest and penalties on ALL funds ever borrowed.

    by Roger B — January 22, 2014

  21. I have a suggestion but it will immediately be lept upon. Just allow us to keep what we work for and invest or save it as we please. The immediate response is “What about those who don’t?” I don’t have a good answer for that, you can’t just let them starve to death but why am I responsible to support 10 other people who have never helped themselves? How long can we survive if the penalty for doing nothing is an expense-paid life?

    by Pat — January 22, 2014

  22. I’m self-employed in a small business. My two employees are part of a 401k/profit sharing/safe harbor plan. They each put only $50 a month into their 401k’s. I put 3-8% a year of their salaries into their profit sharing plan. I KNOW they could put more money away for their retirement because I see them waste at least $100 a month on fast food/coffee all the time. Another past employee emptied her 401k, against my advice as fiduciary, in order to put an above ground pool at her house. Really? 🙄 There needs to be more strict rules on touching 401k funds because too many people just don’t get it.

    by Lynn — January 22, 2014

  23. Elected officials should be personally liable for underfunded retirement programs.

    by John — January 22, 2014

  24. There is no “one size fits all” solution. I chose a multiple revenue stream strategy along with a planned right-sizing strategy for expenses. One lives the life they created.

    by Steve — January 22, 2014

  25. No amount of retirement planning is a guarantee and we can not and should not fault those that go into retirement when life has been less than perfect. We are the lucky ones that had the means to save and that have not had to deal with life’s curve balls and are just happy to have survived to retirement.
    For those of us now in retirement,or very soon to be retired, often overlooked is the HECM (Home Equity Conversion Mortgage)in our retirement planning. The “New” HECM is now being used as a long-term solution and not just a short-term cure. While we are being told to use a HECM to pay off an existing mortgage or other debts, too many other viable usages are being overlooked. While the HECM is there for the 5.2 million of us with the retirement blues,it is also finding it way into the financial retirement planning of the financial elite and wealthy achievers by their own financial planners and wealth advisers. A HECM can enhance and add longevity to our retirement planning. Your home equity really is an asset an a retirement savings plan that you can use at any retirement level.

    by Patricia Cook — January 22, 2014

  26. ::roll: I agree with Bob and Doro. I am fortunate in that I will have to work pensions in addition to social security – none of them being large but they add up. My wife and I have both worked and have an IRA and a 401 K. So, we should be okay although we won’t be living in the lap of luxury. I know some people have not been wise in their savings for whatever reasons. I also know that many people have not had the income that I’ve had – most because they did not have the opportunities that I have had. Other shave had illnesses, job losses and other personal problems. “But for the grace of God, there go I.” I think Australia and Chili are wiser than our government and people have been.

    by Wallace Hardy — January 22, 2014

  27. Most people I talk to always say I will never be able to retire, I will have to work till the day I die. That right there tells me they know nothing about retirement planning and they are the ones trying to live on S.S. You have to start young at retirement planning and with a good attitude and some goals to set for yourself and to reach them. The hardest to thing to say is no to wants and desires in life. My wife and I will have our pensions and S.S. We also have our Roth accounts and 2 different mutual accounts. She did not like putting away that much money but know as we are getting ready to retire she sees the reward of an easy retirement. Most people don’t want to responsibility for their own future, that’s why we have the government that we do.

    by Steve — January 22, 2014

  28. We need to be careful before we make some changes in the U.S. Social Security system. If a single individual works their entire life (at least 35 years paying the SS tax) at a job paying just above the poverty level and continues to work until age 70, their Social Security benefit is greater than their last pay. While I wouldn’t recommend that to one of my children it does show that the system lives up to its name, “social security”.
    Folks at higher income levels don’t get nearly that percentage back in benefits so they need to be more responsible for their own finances if they want to maintain their standard of living in retirement.
    Roger B. (above) makes a very good point about the need to raise both the standard and minimum retirement ages. If the worker to retiree ratio gets to low, we start getting shortages of the goods and services. The few workers can’t produce enough for the whole population. That will drive prices higher so both workers and retirees suffer.

    by Geoff — January 22, 2014

  29. My wife and I saved the maximum allowed in our 401k (in the beginning, we were only allowed 7 percent of gross). Eventually being allowed to fund the 401k with 15 percent of gross and our company only contributed 2 percent. I now am 67 years old and retired. Had I funded a good individual retirement annuity with the same tax deferred money, I would have retired with a guaranteed income that is at least 30 percent more than TRANSFERRING our 401k to a individual retirement annuity at age 64. My annuity investments earned more in a depression than the 401K did in a booming period with out guarantees

    by Bruce Turner — January 22, 2014

  30. John, all of the suggestions you listed, although a bit punitive sounding, make sense. There are a couple of other issues issues at play here beyond simply saving for retirement: 1) the cost of living will not decline anytime soon – especially considering the ever expanding national debt limit which will have an impact on taxes; 2) savers have had to kill their nest-eggs due to under or un-employment. The employment picture needs to change – especially for the over 50 crowd.

    by Dave — January 22, 2014

  31. I think that there will never be a simple solution but don’t think it’s right to penalize people within 10 years of retirement by changing the retirement age. I am an average person making an average wage for my area. When I was young I thought I was immortal, as I got older I believed that my retirement would be handled by my company’s retirement plan. But the real world intervened and things have happened. Although I have always been pretty responsible I haven’t put away as much as I could have. With so much market instability and the fact that banks are paying virtually no interest, my solution to stabilize social security (which will now be my main source of income) is to simply raise the base amount that is taxable. Everybody, no matter how wealthy has a family member that utilizes or will utilize social security.

    by KIrk Brandenburg — January 23, 2014

  32. I have two suggestions…
    (1). Start a retirement fund for each child when they graduate from high school, as a graduation present the government gives (10k) or some amount that could start the process of earning money, a small part of the earnings over time would go back to repay the gift, then there would be a mandatory amount taken from earnings to supplement this along the way. No way to use this unless you become disabled or retire at (x) age. If you die, part goes to a death benefit and the rest goes back into the system to supplement the new generation. Not sure what this would amount to over time but I would imagine it would be a good amount of money for retirement.

    (2). Health care…being the youngest in my family I have seen through experience what became of the money that my hard working and frugle parents managed to put together after working all their lives. Unless you are in the 1% or are lucky enough to make it through life without any physical or mental impairment you will find that in the end when you start needing help …the money you have saved or pensions you have or 401 K’s won’t be enough to keep you afloat. Most lose all they have and wind up on Medicaid in a nursing home. We need to find a way to have medical care without going broke by the time we really need help.

    by Iwashere — January 23, 2014

  33. :oops:My daughter and her husband live in Australia. The employer must set aside an additional 9% (soon going up to 12% of her salary. While this is quoted as part of your package, EVERYONE, part time
    too, saves. One starts saving as a teenager as soon as they work!

    For example, my daughter’s company has increased her salary 3% to accommodate the change. The
    bottom line is that in reality everyone in Australia has an income of 9%+ income. There is no Soc Sec
    and health care has no relationship to employment. Everyone has health care. Over all their tax
    bill is a lot less in AU than the US!

    by Deborah Cacho — January 23, 2014

  34. In terms of Social Security, several options to keep the system solvent have been proposed. Whether it is working on the revenue side (e.g. increasing Social Security Taxes, removing the earning cap that gets taxed, etc.) or the benefits side (e.g. increase the retirement age, reduce inflation adjustments, means test benefits) there are a lot of ideas, but little action up until now. The longer we wait to address the Social Security funding issues, the more drastic the solutions will need to be to cover the shortfalls.

    What I would prefer to do is set out a couple of criteria that could shape how the problem gets solved:

    1) Which options or set options will provide a long-term solution and will do this without creating a whole series of additional problems. For example, analyses have found that we could solve the Social Security funding problem in total by raising both the employer and employee contributions from the current 6.4% to 7.6%. However, the likelihood that this solution would have negative repercussions for economic growth and jobs is high. So, raising payroll taxes may be part of the solution, but not in total, and only in moderation.

    2) Is the solution fair and equitable. Two possible solutions that have been proposed makes me wonder. First, eliminate the income cap that gets taxed for Social Security. This would affect less than 10% of workers, mainly the more affluent, but the taxes of these workers could increase dramatically. Second, means test Social Security benefits. If you have retirement incomes above a certain point (income would include pensions and withdrawals from retirement savings) reduce or eliminate benefits. Together, increase taxes on the more affluent, but deny these same people benefits. Is this really fair and equitable. In these arguments, people always go to the extreme examples: Does Warren Buffet or Bill Gates or Alex Rodriguez need Social Security benefits to survive. The answer is probably not, but the proposed limits are benefits reductions beginning at retirement incomes of $55,000 and total elimination of benefits for anyone with incomes above $110,000. Do a little math and you will conclude that people with retirement incomes in this range are hardly affluent. If these income requirements are not inflation adjusted annually, then these criteria could catch nearly all of us in time (think the Alternative Minimum Tax – AMT in income taxes; used to make sure that the wealthy pay their fair share, not inflation adjusted, so now increases taxes for people in the middle class – the government is not very good at these sorts of things).

    3) Whatever solutions are accepted on the benefits side, make sure that people in or near retirement have enough time to adjust. People need to have time to plan for the income they will have. I would also be very liberal in terms of the way we define “near retirement.” Ten to fifteen year out would be the minimum in my view.

    So, we really have two questions: 1) how to solve the problem and 2) how to do it in a fair and equitable way that gives people time to plan and adjust. Don’t let Washington renig on their promises to seniors!!

    by Don Schmidt — January 23, 2014

  35. It’s so sad that this country’s crooked self-serving politicians have ruined our SS system and made it so difficult for the hard working middle class to enjoy the latter part of their life comfortably. I don’t believe there is any way to correct this mess……short of a clean sweep of the government and starting over, which will never happen. This country is broken. There is no fix to it – for many, many reasons……sheer greed and corruption among the highest. It’s completely out of hand. I have worked and struggled and now I am going to bite the bullet and retire anyway……whatever happens, happens. I would like a few good years to enjoy myself and my retirement before “old age” sets in completely! No one knows what the future will bring and considering the past…it could very well all go to hell tomorrow……hopefully not but I am sick of wondering if it will get better or if I should work longer to have a little more savings. When is enough – enough? Maybe our future government officials will wake up and start to clean up the mess but I doubt it. The rich only want to get richer and could care less about the rest of us……and most politicians are rich and have very rich ” friends “. They will only take care of themselves. If I had the resources I would move out of the country but I don’t so in a few months, I will retire and hope it works! My opinion, everyone has one!

    by Sue — January 23, 2014

  36. Tough question that nobody really has an answer for, Social Security is not anything like it was intended to be, the government has taken our money and spent it however they wanted. If the 15% plus money paid into the system had been invested for each individual over their work life we would be far better off. Even if a small % of that 15% plus was set aside for the less fortunate we would still be better off. Raise retire age to 68-70? Early retirement 65-67? Mandatory 401 contributions in addition to SS might work if individuals were unable to touch any of the monies invested until a least early retirement date. Each individual must take responsibility for their own retirement however many people just don’t understand the financial side of life except to spend, spend, spend.

    by Pat H — January 23, 2014

  37. I cringe every time someone suggests raising the age at which one can receive full Social Security benefits. I am 63 1/2 years old and frankly, I am burning out after working at one job or another since age 11 (and raising a family while working). I can’t imagine what it will be like for our younger generations if they have to wait to age 70 for full benefts. The aging process is what it is. Many of us do not and will not have the stamina to keep going and going even if our legislators think we should be able to do so.

    by Sue S. — January 23, 2014

  38. I am so dismayed by the thought that folks with 55,000 in retirement income could start to lose their SS benefit if the above mentioned proposals are put into effect! Once the government takes taxes from the $55,000 there appears to be hardly enough to actually pay for living expenses and the cost of health care, I would suggest that if this goes into effect, the level of 500,000 would be more appropriate. It is true that celebrities, professional athletes, and the ” wolves of Wall street” do NOT need to draw their SS or medicare, although the rich would find loopholes – they always do – that are not available to the rest of us. Definitely discouraging….

    by Sandyzerb — January 24, 2014

  39. Sue S. and the rest of our aged community;

    I have been in favor of the government taking a more “hands-off” approach to all of our money. If the fed would stay out of our, not their, Social Security fund, the issue of payments wouldn’t come up.

    I also have worked towards getting a “flat tax” system in place, just like Steve Forbes wanted when he ran for presidential nomination. If everyone from the smallest earner to the largest corporation paid 15% as income tax, we could pay down our debt,, pay up our military, police, and school teachers. We could invest in true, sustainable alternative energy that would give the next generations a chance to live nearly as well as we have.

    It amazes me that the TEA Party hasn’t pushed harder for a structured payment tax base.

    I’m Builder Bob and that’s what I think!

    by Builder Bob — January 24, 2014

  40. Re-elect nobody – no matter how good they are or aren’t. It’s the only way to clean house. The definition of insanity is doing the same thing over & over & expecting different results —

    by Jeanne — January 24, 2014

  41. While the idea of mandatory contributions to a 401K sounds good, the reality is not always wonderful. My ex-husband worked for many years for a well-known company. Executives were well compensated with stock rather than salaries. We had a very solid 401K, but it was all in company stock because executives were carefully questioned if they sold stock. My divorce was predicated on that, and I believed if I was careful I was in good shape. The value of the stock went from $47/share to .99 over a short period of time. I went back to school and got a MA and went back to working full time while going to school..not easy considering I was in my mid-50s. I am now selling my house and moving to something much smaller and much cheaper. Unless companies are forbidden to hold their employees hostage by not letting them diversify, the 401K can become meaningless. We were careful savers and did not live up to the level of his income because we have a handicapped daughter. Like many others, careful planning and saving have not worked out. I’m on plan D now and hoping for the best.

    by Barbara — January 24, 2014

  42. Back in the 50’s, a NYC bank ran a commercial. In it, an older gentleman is seen waving goodbye to an ocean liner. He turns to the camera and says, “I had always dreamed that one day, after I retired, that would be me. But I never saved for retirement.” The commercial was obviously about saving. Remember that this was 60+ years ago. Fast forward to today and you could do the same commercial. There are some good ideas being put forth, but the idea of “personal Responsibility” doesn’t get much credit. Certainly life doesn’t always work out the way we want it to – that is part of the maturation process. There is no way that responsibility can be legislated. Like Forest Gump said, Stupid is as Stupid does.

    by Tom — January 24, 2014

  43. The “flat tax” as builder Bob described has a few drawbacks. Who gets hurt more, a family of 4 living on 25K a year (shelter, clothing, food, transportation etc.) paying 17% of that for taxes =$4250 ( the best estimate of what a flat tax rate would be), or a CEO, making 10 million a year shelling out $1.7 million a year?
    It’s a good start but it needs work.

    by Fred — January 25, 2014

  44. I have to take exception to the idea that saving solves all problems. That may be true in some cases, but not all. I worked hard and saved diligently for years. I retired with a comfortable sum which I rolled into two iras. Then the problems started. I chose to invest one IRA in a company called Merendon mining, which was supposed to be a gold investment. Te other IRA was invested in a mutual fund with a growth emphasis. I had also purchased three properties, two as rentals. 1. Merendon mining was a Ponzi scheme and my $220k was stolen outright. Te perpetrators, Milowe brost and Gary Sorensen are still on trial in Calgary, but no funds have ever been recovered of allegedly 400 million that went missing. 2. The housing market collapsed and all my properties went upside down. 3. The stock market fell and approximately 40% of my investments in growth stocks were lost. In two years I lost about 500k. No way I could have predicted all those events occurring in such a perfect storm. As a result of my losses, I filed bankruptcy. All of my properties were foreclosed on, but I am fighting one. My money is very reduced and my credit is destroyed. I am scrambling to salvage some kind of retirement, although I did go back to work.

    It is very easy to tell ourselves that people who are struggling ‘didn’t do the right thing’. That may not be true. When I went to bankruptcy court the judge told me he sees people whose retirement was stolen every day. Other people had unexpected illness or other kinds of crisis. Some people had jobs where they never earned enough to save, and worked for companies tat didnt offer 401ks. We live in tough economic times. I think it is important to support each other and not make judgments about people and their circumstances. Especially if you are one of the lucky ones who has had things go well.

    by Ginger — January 25, 2014

  45. About flat tax…no. I don’t see this as fair at all. Clearly 17% of income of someone earning30k is going to be way more difficult than iris for someone earning 10 million. I don’t like income tax at all actually. I think all tax should be consumer tax. The more you consume, the more you pay. This encourages people to be more ecological, puts control back into the hands of the taxpayer who can control his tax by controlling his spending (or not), and is fair to everyone. The only argument against this would come from the marketing segment, whose interest is in selling as much fluff and junk as possible to make more for the corporations. But for the average citizen this is fair, easily understood, and easily managed.

    by Ginger — January 25, 2014

  46. I totally agree with Ginger regarding the Flat Tax. A Consumption tax would make everyone pay fairly -no matter how their income was achieved. Groceries and prescription drugs should be excluded. Anything else would be fair game. The more things you buy the more you pay–luxury items would have a higher tax, so if you want a Mercedes instead of a modest Toyota you would pay more. (This is just an example). I think a lot of people would make do with a lot less to save money this way.

    by Jennifer — January 25, 2014

  47. Ginger – all “flat tax” proposals include a substantial exemption amount to protect low income people from being taxed on the first dollar of income. The beauty of the flat tax (if it could be enacted) is that it would stop politicians from claiming to the majority that somebody else will pay the higher taxes that he is proposing. If everyone had to pay the same tax increase, there would be much more resistance to tax increases.

    by Tony Conte — January 26, 2014

  48. Dear Members: I think we are getting a little off the track. Flat tax vs regular tax is interesting but we would rather focus on things more directly related to retirement planning and preparation in this article (which has been very interesting so far!) Thanks to all.

    by topretirementseditor — January 26, 2014

  49. The solutions are simple – many of those who commented confirm that their retirement is a success. That is, it must be a priority – relative to other financial goals. Where it is, the IRA alone coupled with social security may be sufficient for middle-income Americans. Save the maximum in an IRA over a 40 year working career, earn a reasonable rate of return like 5% or 6% on average, and retire at SSNRA or later date, and you should be able to finance retirement.

    But, that is not what the policy wonk’s want. They want a solution for Baby Boomers. Fact is, it is TOO LATE for some new government program to solve retirement preparation issues for those in their 50’s, 60’s and 70’s who failed to prepare for retirement.

    The best we can do is not screw it up for generations to come. Most recent EBRI studies show that 30 years of saving and SS are enough – so – let’s work on shoring up Social Security and Medicare finances, and not intrusively set up the federal government to determine how you and I should be able to use / spend what we, ourselves, funded.

    by BenefitJacki — January 26, 2014

  50. Tom – I believe in the 50’s during the Eisenhower years personal responsibility was an expectation. Today personal responsibility has become government responsibility. For too many people the expectation is that the government needs to take care of me.

    by Bubbajog — January 26, 2014

  51. While it is true we ave more programs in place to aid people than we did in the 50s, I think it is really simplistic and biased to blame a lack of personal responsibility for ll the problems. When Lehman brothers chose to go bankrupt in 2008, they first sold packages of bad mortgage debt to pension plans across the country. They knew the packages were worthless, but with the help of the rating system Morningstar,, who gave these investment vehicles a stellar rating, they were able to sell them at a profit. Subsequently, pension plans around the country were completely bankrupted. Although I don’t have the complete list in my head, one that I remember was the Mississippi Teachers Union pension plan. What that means is that these people who worked all their lives expecting a pension, woke up one day and their pension was gone. This is not a lack of personal responsibility…this was trickery and basically theft by Wall Street banks. Maybe the people on here who have been lucky enough to not lose their retirement investments could try to have some compassion for people who have had misfortune. There are far more who have ad misfortune than there are people who were irresponsible. Just my opinion.

    by Ginger — January 26, 2014

  52. I agree with you ginger. Not sure why people tend to throw stones when they haven’t walked in another’s shoes. Seems like the ones who have been fortunate in life are bitter toward those who have not been. The optic is how we could fix the retirement system…not how can we fix people. How can we as a population ensure that we are financially stable when we retire. I believe that we need to start young… When a child is born, or when they finish high school…put money aside that can grow and be supplemented during their working years without anyone being able to touch it . It’s too late to change anything for this generation but something could be implemented for future generations.

    by Iwashere — January 27, 2014

  53. I like the sounds of the Australian plan described by Deborah above. Mandatory savings from the time a person begins to work – no SS system – contributions by employer into the savings for each worker. Health care for all not on the backs of employers would be a great relief! The only issue I see, what is done for the unemployed and disabled who cannot work – who contributes to their retirement savings? I suppose it does highly encourage everyone to work in some way.

    by SandyZ — January 27, 2014

  54. I agree Ginger. Many people lost their retirement through no fault of their own.

    by easilyamused — January 27, 2014

  55. Ginger you are correct – it was wall street packaging of bad mortgages that hurt us, but the problem started with the no doc mortgages and the absurd idea that liberal vote seeking politicians had about everybody owning a house, whether they could afford it or not, plus the guarantees by the scam outfits Fannie and Freddie. It was as usual, the conscientious people like us who had their savings wiped out. pr

    by Dan — January 27, 2014

  56. Investing is risk. The more risk you take could mean better returns, or incredible losses. It is the responsibility of each individual to understand the risk of any investment. Greed drives many individuals to make very risky and poor investments. Financial education is extremely important, especially in retirement.

    by Bubbajog — January 27, 2014

  57. Greed also drives unscrupulous business people to devise ways of tricking people into bad investments. You should see the elaborate documentation I was provided about the reliability of Merendon mining. So good that thousands of people invested as much as 400 million…all stolen by Gary Sorensen and Milowe Brost. And, when the pair were eventually arrested, the SEC wanted to fine them 375 million. The SEC…the same group who did nothing to uncover this scam before so many people were stolen from…wanted to fine the perpetrators 375 million…almost all the stolen funds. Even if anything had been recovered, we would have been stolen from again by the SEC. We should be discussing how and where we can store our savings to guarantee as much safety and growth as possible; not blaming people who have been victims of crooks and thieves, or who have been unable for other reasons to amass a good retirement portfolio.

    And yes…some people had mortgages who had no business having them. Given by mortgage companies who had no business giving them. But here’s the difference…the mortgage companies and banks have received BILLIONS in bail outs….the people who lost their homes received nothing. Thank god the careless, unscrupulous lenders can stay in business! And who cares if te naive, hopeful working class people are now bankrupt? They should have been more responsible!

    by Ginger — January 28, 2014

  58. Ginger, I have to disagree with you. Investing is always, always, always a risk, unless guaranteed by the the FDIC. The stewards who were trusted to run the pension plans had a duty to minimize the amount of risk they could handle with the returns expected. They had a CHOICE of where to invest and they made bad choices. I am an average person and investor and knew that people were taking out mortgages they couldn’t afford. I bet you knew it too. I would never have invested in mortgages. A current analogy is the municpal bond market for cities in trouble. Would you invest in Detroit’s municpal bonds, even if they were highly rated and had a great ROI?
    Getting back on track to the current subject, everyone should have a portion of their wages into a retirement account, just as they do SS. However, this discretionary portion can not be touched unless retired or disabled. Even if the money is invested in CD’s or Treasuries, it will belong to the owner or their heirs – if they are deceased, with a stipulation that the government can never borrow from the funds.

    by Joyce — January 28, 2014

  59. Ginger – I totally disagree with you. When you invest you must educate yourself thoroughly on each investment. I am 63 and have been investing since I was 19. Higher ROI equals risk, and the investor needs to study the investment a lot more thoroughly. If you do not understand the investment walk away. The idea of quick riches leads people to make terrible mistakes. I get calls on investment’s offering 40% to 50% returns, and I immediately hang up the phone. If the investment sounds to good to be true, then you know it is.

    by Bubbajog — January 28, 2014

  60. Bubbajog and Joyce, I can only congratulate you on being so much smarter and more responsible than the thousands upon thousands of people who have been stolen from.

    by Ginger — January 29, 2014

  61. Social Security to me is a safety net not a retirement plan. Back in the early 70’s when I started working at 14 my boss told me to not depend on the government (Social Security) program if I wanted to have a good retirement. To me that is the best way to fix the problem, just tell people what SS really is: a socialized program to keep the elderly out of the “poor house”. To fix the retirement system: #1 I applaud President Obama’s healthcare reform, by eliminating most if not all the financial risks we had before. #2 His order to the Treasury to start the MyIRA program, when I started out I could not find a safe and easy to understand place to save my money with a good return and tax deferral for the long term. MyIRA is a great way for anyone to start. #3 Education, as I read earlier “Stupid is as Stupid does” Our children need to be in school starting at age 4 or earlier if we want to secure their and our future.

    by Bob H. — January 29, 2014

  62. It looks like the President has added another idea to this discussion with his MyIRA announcement in the State of the Union address. Although details are a bit sketchy, it appears that this optional savings mechanism roughly falls under the idea of 401ks. In our opinion a mandatory savings mechanism would be so much better as a way to solve the problem of half of retirees expecting not being able to maintain their standard of living in retirement, but then again, we don’t recall being asked for that opinion

    by Admin — January 29, 2014

  63. i agree with those that said that government should stay out of our social security. It does not belong to the government, but the person who worked hard to earn it. And the social security has no right to our pension money. These are two separate entities, but the social security wants half of my measly pension while my social security, itself is measly. Greed will get no one anywhere. The bigger government, the more problems we have.

    by Cheryl Coverly — January 29, 2014

  64. I agree with Ginger! I know a lot of people, including my wife, who invested money in stocks and bonds, and because they were busy making a living, they placed their trust in licensed financial experts who worked for banks. When they were losing a lot of money, the financial experts didn’t even call them or change where their money was invested. As a result, two of my friends lost investments of hundreds of thousands of dollars and my wife lost nearly half a million, then she was phased out of her job at age 55, because of age. Now even though she has a masters degree, she is working part time for $9.50 an hour, but we have down sized and cut back and we are surviving. Congress financed wars using what they called “social security excess funds”, and never paid it back. That money should be repaid and the government should keep their hands off the money. Social Security should be an independent agency overseen by the government, but the Social Security employees should not be federal goverment6 employees and the money is not government money. All parents should be required to purchase whole life insurance on their kids before they turn two. It would only cost about $4.00 per month per child. The whole life insurance should not be able to be cashed in but becomes an annuity at full retirement age. The policy should be able to be increased in value and monthly payment if the insured desires, this should then insure that the insured always has some retirement beside Social Security.

    by Larry — January 30, 2014

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