Retirement has changed and Americans today need more resources and options to better help them prepare financially for their non-working years than ever before, according to the U.S. Department of Labor.
Whereas in the past retirees could lean on Social Security and defined benefit pensions to plan for a comfortable retirement, the Great Recession has showed just how vulnerable assets like 401(k) plans and IRAs can be, said U.S. Secretary of Labor Tom Perez in a recent blog post.
“A few decades ago, we had a pretty solid three-legged retirement stool. Social Security and personal savings combined with traditional pensions led to good middle-class retirements for millions,” said Perez. “But today’s stool is a little too wobbly to support this and coming generations of workers and retirees.”
Workers are largely responsible for their own retirement investments, but as much as 60% do not have job-based retirement savings vehicles at all, Perez notes.
Aiding this large majority has led to the establishment of initiatives like the myRA program, a type of Roth IRA account sponsored by the U.S. Treasury announced by President Obama in his January 2014 State of the Union Address.
“myRA’s help Americans kickstart their savings in a way that’s simple, safe and affordable,” writes Perez.
Enrollees’ money is automatically placed into the myRA account, as long as their employer uses payroll direct deposit. The program has been touted as a viable financial resource as it is backed by the Treasury and costs nothing to open an account.
But even with this program, as well as other initiatives states are launching in efforts to help workers whose employers do not sponsor a retirement plan, more efforts are needed to encourage Americans to be proactive about planning for their retirement.
“The days of a defined benefit pension that you couldn’t outlive are a thing of the past,” writes Perez. “Today, we have to take greater ownership for starting our savings, managing and then figuring out how much to draw in retirement.”
Written by Jason Oliva