Broken Eggs: America's Looming Retirement Crisis

10,000 Baby boomers are reaching retirement age every day–and by 2030 all boomers will be at least age 65, according the U.S. Census Bureau. While average life expectancies are increasing, but the average retirement age is not increasing nearly as much. These longer periods of retirement are beginning to strain the financial resources intended to support workers in their golden years.

Economist Teresa Ghilarducci with The New School of Social Research has studied the savings and assets of future retirees. Her startling findings show that working Americans are actually going backwards–the first time since Social Security was passed in the throes of the Great Depression.

“Most Americans who were middle class when they were working all their life are going to be poor or near-poor retirees,” says Ghilarducci. “We’re going to have massive downward mobility. That you’re middle class all your life, and you now find yourself to be really in a chronic state of want and distress about finances. And it gets worse as you get older.”

Research from the Employee Benefit Research shows that, as a group, American workers are estimated to be $3.83 TRILLION short of what they need to retire comfortably. While there are several things to blame for this (including the cost of healthcare in retirement) the obvious is the crumbling three-legged retirement.

The three-legged stool is a metaphor for how many retirement experts traditionally looked at planning for retirement. The three legs represent Social Security, an employer pension, and employee savings. It was expected that the trio together would provide a financial foundation for Americans’ golden years. None of these three were supposed to support retirees on its own–you need each one to build a strong retirement foundation.

As times have changed, so must retirement planning strategies. For many workers today, a nest egg built on the three-legged stool is no longer possible.

Social Security Bankruptcy

Social Security–the program created by Franklin D Roosevelts to prevent aging Americans from falling into poverty–is on the brink of collapse. According to its own administrators, Social Security is projected to be depleted by 2033.

How did this happen? Quite simply, the ratio of workers to retirees has been decreasing for many years. This is due to a number of reasons:

• Increasing lifespans in the population
• Decreases in fertility rates.
• No change in average retirement age

These factors combined has resulted in fewer workers funding retirement programs, resulting in significant stress on pay-as-you-go systems such as Social Security. In 1950, there were 16.5 workers for every Social Security beneficiary. Today, there are less than 3 workers paying in for each recipient.

This doesn’t mean Social Security will disappear completely in 20 years. As of 2019, projections indicate that taxes still being paid by younger workers will be enough to fund about 79% of scheduled benefits.

Underfunded (or Non-Existent) Pensions

There’s no way around it–company-sponsored pensions plans are nearly extinct. While pensions were once considered a standard of corporate America, today, less than one out of every five private sector employees has one. In fact, according to data from the Department of Labor, the number of pension plans offering defined benefits dropped by about 73 percent from 1986 to 2016.

Most pension plans have been replaced by 401(k) plans, which don’t require contributions from employers and offer a variety of investment choices. Not only does this shift place a greater responsibility on the worker, most 401(k) plans don’t offer a way to invest in something that provides guaranteed income.

Historically Low Personal Savings

As the Social Security well dries up and pensions disappear, the third leg of the retirement stool–personal savings––is more important than ever before. According to 2020 data from the Bureau of Labor and Statistics, while 71% of the American workforce has access to a 401(k), only about 55% participate. When you look at small business retirement statistics, the number of access and participation shrinks even smaller.

To help ensure you have a large enough nest egg, it’s wise to create a plan early in life—or right now if you haven’t already done so. It’s also extremely important to take advantage of workplace savings plans like 401(k) (if you have one available) along with personal tax-advantaged retirement accounts such as an IRA.

Using tools like a retirement calculator can help you determine if you’re saving enough for the future–or if you’ll need to increase your contributions to achieve financial security in your golden years.

We know that no single program can address the challenges facing our current retirement system—it will take several programs and solutions to make progress.

SECURE Act

In 2019, Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed as the first major step toward enhancing American’s retirement security. Key changes from the bipartisan legislation included:

• Increased tax credits – when small business owners set up and run retirement plans.
• New incentives – for retirement plans with auto-enrollment.
• Greater scope – long-term, part-time workers can now participate in 401(k) plans.
• Expanded options – multiple, unrelated businesses can now partner under a SINGLE PLAN.

Curious if you’re eligible for a SECURE ACT Tax Credit? Try our calculator. 

This congressional offering is an encouraging sign that politicians are realizing the gravity of the looming retirement crisis and are hopeful it will have a positive impact on the overall financial security of working Americans.

State Mandates

While the Federal government have enacted some measures toward addressing the retirement crisis, many states have taken the lack of workplace access to savings into their own hands. Since 2012, 30 states have introduced some form of retirement legislation.

So far, 10 states have enacted a government-sponsored retirement savings program: California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Oregon, Vermont, and Washington. These plans tend to target small to midsize businesses in the private sector, along with low-to-moderate income households. While the rules of these programs vary greatly from state to state, all attempt to bridge the retirement gap for American workers who otherwise would not have access to an employer-sponsored plan. Typically, the expense for the business owner is negligible, while the impact on savers could be exponential.

What has changed since the making of Broken Eggs:

Broken Eggs fields a team of veteran documentary filmmakers led by former CNN Producer Emily Probst Miller. The award-winning crew also includes Writer Al Crim, Producer Heather O’Neill, Director of Photography Jon Boal, Videographer Andrew Moore, Editor Dave Timko, and Animator and Illustrator Joe Peery. Executive Producer Chad Parks, a retirement expert and founder of Ubiquity Retirement + Savings, and Producer Sylvia Flores spearheaded the project with a road trip across America to hear from everyday Americans. The duo then tapped Probst Miller to lend the film’s weighty subject her journalist lens.