Retirement has not always been even a likely event, let alone a possible problem. Even after people started living longer, the family and community cared for those who no longer worked. Most people stayed where they were born and made sure their parents were fed and sheltered.

Then people started moving away from their hometowns in search of better opportunities. Small towns across the country were left with few younger people to care for the elderly.

This led to the need for our government to solve the elder care problem, especially financially. Social Security was the result, and it worked quite well. After all, normal retirement age was pegged at 65, and life expectancy for a newborn the year it was passed was 62. For those who made it to 65, the number of payments made was insignificant compared with the incoming cash flows. This is now reversed.

Employers and unions began seriously considering the issue of retirement for their employees and members. Defined benefit pension plans were developed and adopted by most employers with 100 or more workers. These plans, along with Social Security, served very well because employees tended to stay with the same company for their entire career.

However, loyalty by employers to employees, and by employees to their employers, began a gradual deterioration, and defined benefit plans were perceived by both groups to be less attractive. This led to the development of defined contribution plans, which developed into today’s 401(k) and 403(b) plans.

Today’s employees’ retirement hopes are based on defined contribution plans and an uncertain Social Security benefit.

That brings us to our current problem. Though virtually all large employers have defined contribution plans with generous employer matches, workers generally must contribute from their pay in order to get the company match. The problem is that most young employees decline to participate, or participate at a level that will not provide the amounts they will need in retirement. That is at least partially the fault of the people who claim to be helping them plan.

Many in the employee benefit community have worked hard to develop computer programs that all seem to end up at the same place, telling employees that they will need $2 million to maintain their standard of living in retirement. The result is that many workers become discouraged before they even begin. Encouraging participation in retirement plans at even minimal levels to begin with should be the goal. Any amount set aside now will be better than saving nothing now and then trying to catch up in the last 10 years of employment.

Another serious issue is that more than 75 percent of our employed population work for employers who have fewer than 25 employees. Many employee benefit companies either do not serve that market at all or do so with administrative fees that discourage the small employer from adopting a plan for her/his employees.

The required solutions to the Social Security problem combined with the reduction in employment-provided benefits will cause serious financial problems for our nation. The government will seek solutions, but the magnitude of the problem is going to be far beyond the government’s ability to politically solve it. You and I must work now to find ways to increase the retirement cash flows for all of us, from non-government sources.

That means encouraging larger retirement plan contributions from employers (and employees as they are able) and finding ways to make those plans attractive to small employers. The first involves changing the approach of planners and consultants. The second involves finding ways to administer plans at an affordable cost for small employers.



Thomas Walker is a managing partner at RCP, a custom retirement planning company in Ankeny.