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NATIXIS INVESTMENT Managers published its ninth annual Global Retirement Index last week, which focused on overall wellbeing and financial security. The U.S. slipped to an unimpressive 17th out of 25 countries.
Perhaps that isn’t surprising given the state of Social Security. Based on the program’s current financing, benefits would need to be cut after 2033. None of us wants to hear that, but we also aren’t surprised. The Natixis study reports that a whopping 77% of U.S. investors think rising government debt will lead to reduced Social Security benefits, with 46% of millennials saying it would “take a miracle” to live a financially secure retirement.
Allow me to offer a caveat to that seemingly grim outlook: It isn’t as if Social Security goes belly up a dozen years from now. The latest projection states 76% of scheduled benefits will be payable if we stay the course. There will almost certainly be changes to the current system. Perhaps we’ll see higher payroll taxes to fund Social Security, adjustments to the full retirement age or reduced benefits for wealthier individuals. Or perhaps the government will simply borrow more money. Whatever happens, sharp benefit cuts aren’t something the electorate will take kindly to.
There are also reasons to feel somewhat upbeat about the future. Employers are stepping up to the plate in significant ways. Wages are rising sharply for younger and low-wage workers. Some major corporations have announced they’ll pay employees’ college tuition costs.
On that note, Natixis found that 82% of U.S. investors believe employers have a responsibility to help their employees achieve a financially secure retirement. Taking advantage of your company 401(k) match is a common personal finance refrain. What if employers pay workers more and help alleviate student debt burdens? That could pave the way for employees to contribute even more to their 401(k).
