Retirement Crisis: Don’t Lean Too Heavily on Social Security


Image Source:

John Bogle, who founded the Vanguard Group in 1974, has helped defined what long-term investing looks like for the average person. Credited with the creation of the first index fund available to individual investors, he has been one of the chief architects of the way in which people participate in the retirement system, and over his long career in the industry, he says he has seen the pillars of that foundation erode in the face of bad policy and economic hardship.

“There are three pillars of the retirement system,” said Bogle at a Morningstar conference in May. “One is Social Security. Two is the defined-benefit plan, and three is the defined-contribution plan. They are all in terrible shape.”

“Terrible” may be an understatement. It’s not productive to cry wolf, but the word “crisis” has apparently attached itself like a parasite to the end of the word “retirement,” and the data appear to validate the phrase. Sen. Tom Harkin (D-Iowa) helped legitimize the phrase in a 2012 report titled “The Retirement Crisis and a Plan to Solve It.”

In the report, Harkin, who is chair of the U.S. Senate Committee on Health, Education, Labor & Pensions, showed exactly how poorly the retirement system is working: Americans are running a collective retirement deficit of $6.6 trillion, only 20 percent of workers have a defined benefit pension plan, and half of Americans have less than $10,000 in savings.