There are no shortage of articles on the Internet talking about the best strategies for retirement. Many of them tell you to save a minimum of 10-15% of your gross salary in your 401(k) account and to take advantage of compounding interest and gains. But we all know that if you're living paycheck to paycheck, that just isn't possible. Add up all of the expenses just to live your life daily, and it becomes abundantly clear that people simply don't make enough money to cover their basic expenses. I'm not going to go into the wealth inequality that allows this to happen - that's a topic for another day - but suffice it to say, if you're not making enough money - if you can't SAVE enough - you can't retire. End of story. There are painful repercussions to not having an older population coming out of the work force and allowing the younger generation to take their place.
Let's start with why we're here. Back in the day, we had pensions: employer-sponsored programs that provided for an employee after a certain number of years of service. This meant that employers had skilled workers for longer periods of time, and their retention numbers were relatively stable until that person decided to retire. To be fair, pensions ARE expensive. Paying someone a specific amount each year they are alive and in many cases, providing for their healthcare, put an undue burden on businesses. Let's also keep in mind, most pensions were professionally managed, so individuals never really HAD to learn anything about investing. All of that changed in the 1980s. Employers said "No more" and decided to go with an investment vehicle that put employees in the driver's seat, all in the name of that word we love so much: freedom. 401(k)s allowed people to choose what they wanted to invest in; you had the freedom to do what you wanted with that money. Nevermind that no one taught them HOW to invest, nor all of the little underlying things like transaction fees and broker commissions that slowly eat away at your gains. They just threw people to the wolves, average folks that thought the freedom of choice would be a great thing. And they were wrong. Horribly wrong.
Poor management. Questionable fund choices. Stock market crash of 1989. The Great Recession of 2008. All of these and more have decimated whole segments of the population. People's hard earned money was wiped out in one fell swoop, so of course, if you don't have the money to retire... you don't. You can't afford to.
And here we are. People over 65 continue to work because they have no other choice. Younger people can't move into those higher-end roles because the folks that should have retired aren't. And we are fighting other threats like automation, poor education to create more skilled workers and outsourcing to other cheaper countries. The gig economy and student loan debt has further exacerbated the situation with ongoing instability.
Can this be fixed? I honestly don't know.
There are things that could be put into place at the Federal level that would free up some income. Healthcare is a huge expense for many, so improvements or overhauls to the current system could help many families. Improved education and training initiatives can help people learn how to manage their money, learn valuable investing tools and get skills that would help find better paying and stable jobs. Affordable housing is a critical issue for those living in major cities. In places like New York City, lower to middle class families are being systematically priced out of housing prospects due to out of control rent costs.
What's missing is security: knowing you will be able to pay your rent, afford your medications and buy groceries. Until some of that is returned to what we call retirement, we may never see anyone truly retire again.