I cringe when I read about “experts” explaining how to fix something. Seems to me with so many experts about we should not have any problems left to fix.
The one factor they seem to misread is human nature. What should be done and what people will do are very different.
Let’s see what the experts would do to fix our retirement crisis.
1. “Expand Social Security and make larger contributions to such funds as a standard deduction from every paycheck.
2. “Shore up the finances of the Social Security Trust Fund
3. “Ensure that every American had an IRA via their job”
4. “Make default contribution rate for 401(k)s 10% and the default investment a target-date fund for all new hires”
5. “There should be a single amount you could contribute annually for retirement regardless of whether you have a company retirement plan or not.
6. “Get rid of lifetime required minimum distributions altogether” “It’s just an annoyance to older people …”
7. “Strengthen financial education”
8. “Incentivize and motivate saving”
Item 1 Expanding SS is a half measure because expanding it in any meaningful way is unaffordable to anyone. We need to increase the payroll tax just to keep it solvent. According to the latest Social Security Trustee report to keep the program solvent requires an immediate and permanent increase in payroll taxes of of 3.14 percentage points to 15.54 percent.
Item 2 is irrelevant to the question
Item 3 is meaningless
Item 4 has possibilities if you could get people to accept a 10% reduction in take-home pay which “experts” say should be the savings rate in any case… can you say paycheck to paycheck?
Item 5 I agree, no logic in having different amount based on where you are saving, but again nothing to do with the question.
Item 6 fixes nothing expect to let the wealthier retirees accumulate more money. If our retirement system is broken and people can’t fund an adequate retirement how can they afford to skip any withdrawal from retirement funds, let alone a RMD? They are an annoyance, but this idea is just stupid relative to the question.
Item 7 is a no brainer and not only financial eduction, but training in lifestyle and life choice decision making as well, but knowing what should be done and doing it are very different. I suspect most people know they will need to fund their retirement, but set immediate needs over long-term. And, no, I am not talking about spending all your money on necessities.
Item 8 Yeah, yeah incentivize and motivate people to save. How many more tax breaks do we need and besides, what more motivation is needed than to live a comfortable retirement devoid of opening cans of dog food when you don’t have a dog.