The $6.6 Trillion Dollar Gap

Tomorrow marks the 40th Anniversary of The Employee Retirement Income Security Act (ERISA) that was enacted on September 2, 1974.  The history behind ERISA is quite interesting.  At that time pensions were popular yet there was not a lot of rules in place and enough situations occurred that required legislation to be enacted.  Back then, it was thought that between pensions, social security and personal savings, this three legs of a stool would be enough to fund a person’s retirement.  Today, we know that pensions have diminished with only 20% of employees in the private sector having a pension.  Social security obligations are becoming more challenged with the Social Security Administration estimating the program can pay all promised benefits until 2033 after which point the reserves will be depleted and on going social security payroll taxes will only cover 77% of benefits.  Couple these two with the fact that individuals do not save enough either because they do not have the means, the know-how or I would dare to say the discipline you can see that individual action is needed.  The Center for Retirement Research at Boston College estimates that our nation’s “retirement income deficit” – the gap between the pension and retirement savings that American households have today versus what they should have today to maintain their standard of living in retirement – is $6.6 Trillion Dollars.  Yikes!

So this message is not for the several millions of Americans with income that is barely able to meet the demands of the basic living standards.  I am really addressing the folks who do have the means but maybe not the know-how or the discipline.  With some small changes in spending and saving habits, results will happen and that will create momentum to continue making even bigger changes.  That is how we close the gap….smalls steps at a time.

Check out my first infographic on the subject: