As we all know, Americans are dreadful at saving for retirement. I have run post after post throughout the years showing the stats of how ill-prepared most are for the day they won't/can't work.
Of course there's Social Security, but anyone who is counting on it for their full retirement is going to be unpleasantly surprised. It's just not enough money for most people to survive on and have a decent quality of life.
So what should we do about this problem? After all, it's our collective problem -- not just an issue for those who don't save. We don't want homeless 70-year-olds sleeping on our streets or gangs of elderly people breaking into our homes to survive do we?
One solution is to force Americans to save more for retirement -- similar to the way we force people to pay for Social Security. This piece from Market Watch sums up the idea as follows:
It’s time for the U.S. to create a mandatory, defined-contribution plan, not unlike those in other parts of the world such as Australia or the United Kingdom. Or so says Meir Statman, author of “What Investors Really Want” and a professor at Santa Clara University.
“Libertarian-paternalistic nudges have moved many non-savers into defined contribution retirement savings, but left many behind, along with those with limited access to defined contribution retirement savings plans,” Statman wrote in a paper that’s currently being considered for publication in a highly regarded professional journal. “It’s time to switch from nudge to shove and replace libertarian-paternalistic voluntary defined-contribution accounts with fully paternalistic mandatory defined-contribution accounts for all.”
The article doesn't make a conclusion -- whether this is a good idea or not -- it simply details the proposal by Statman as well as looks at other, similar plans in countries throughout the world.
I kind of have mixed thoughts on this one. On one hand, I do not want the government involved in handling/managing my retirement money. If anything can make a bad situation worse, it's government oversight, involvement, and management.
On the other hand, something needs to be done or else we're all going to be footing the bill for the hordes of elderly people who didn't save while they were working.
I'm interested in your thoughts on this one. Should there be some sort of forced retirement savings? Are there other solutions that would be better? Or perhaps you don't see any problem at all.
Please leave your comments below.