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America is diving head first into a retirement crisis, but perhaps we shouldn’t beat ourselves up for the dismal state of things.The real place to put the blame, says Teresa Ghilarducci, professor of economics at the New School for Social Research, is on commercially-run, do-it-yourself retirement plans that expect far too much from average investors. Like saving regularly and not breaking our piggy banks in a crisis, she writes in the Times:
“First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 per cent of every dollar you earn … Fourth, earn at least 3 per cent above inflation on your investments, every year …
Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die.”
The 401(K)/Individual Retirement Account model first came on the scene 30 years ago. No one could have predicted it would fail back then, but today in the post-recession, consumers are deeply rattled by depleted savings, a lack of knowledge and uncertainty about whether they’ll live to work through their golden years.
Ghilarducci calls this is a “shared problem,” and it most certainly is. But whether the government is ready to create retirement accounts on top of Social Security remains to be seen. It may be as tall an order as asking us to calculate what we’ll be living on 40 years from now.