Retirement Income Security: Challenges and Opportunities

• DOI: http://doi.org/10.1111/rmir.12020
• Author: Roger W. Ferguson
• Published date: 01 March 2014
• Date: 01 March 2014

Risk Management and Insurance Review

C

Risk Management and Insurance Review, 2014, Vol.17, No. 1, 1-6

DOI: 10.1111/rmir.12020

INVITED ARTICLE

RETIREMENT INCOME SECURITY:CHALLENGES AND

OPPORTUNITIES

Roger W. Ferguson Jr.

All over the world, nations are grappling with the challenge of retirement income. In

the United States, the level of angst around the subject continues to grow, as demo-

graphic and economic factors converge to make people less and less confident about

their prospects for achieving a financially secure retirement.

An article in the Washington Post earlier this year perfectly captured the snapshot of

where we are today. Citing research findings (Fletcher, 2013), the article said that for

the first time since the New Deal, a majority of Americans are headed to a retirement

in which they will be worse off than their parents. The reason is the huge deficit in

retirement savings in our country. A 2012 Senate report calculated that deficit to be as

much as $6.6 trillion, or about $57,000 for every household in America.

Against this backdrop, Americans’ confidence about having a comfortable retirement

has hit record lows. Certainly, the financial crisis and economic downturn have been big

factors in creating this pessimism. But the bigger effect is from longer-term factors such

as the shift away from traditional pensions to 401(k)s in the private sector and, with it,

the shift in the responsibility for funding retirement from employers to employees.

Today, more than half of workers say they and their spouse have less than $25,000 in

total savings and investments. And even among people approaching retirement, the

most recent national data show that median combined 401(k)/IRA balances were just

$120,000 per household. These data are from 2010, so the balances are likely somewhat

higher today, given the stock market’s performance. But many households in America

do not even have a 401(k).

Meanwhile, the explosion in health-care costs threatens the long-term viability of even

nest eggs that are well funded. And people worry—with good reason—that they will

be unable to count on Social Security, Medicare, and Medicaid to the same degree that

previous generations of retirees have. These programs are all under great pressure due

to the aging of the population, a demographic trend that is surely one of the most critical

issues underlying any discussion about retirement policy.

Roger W. Ferguson Jr. is CEO of TIAA-CREF, 730 Third Avenue, New York, NY 10017; e-mail:

rferguson@tiaa- cref.org. This article was delivered as a plenary talk at the American Risk and

Insurance Association Annual Meeting in Washington, DC in August of 2013.

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