Major Retirement Trouble on the Horizon: GAO

401, retirement, GAO, Social Security

Dark clouds are a-brewin' on the road to retirement.

Economic and societal trends—such as increases in debt and health care costs—can impede individuals’ ability to save for retirement.

Not a new statement, but always sounds more dire coming from a government entity, especially when it adds that the traditional “three-legged stool” of savings, including Social Security, employer-sponsored plans and individual savings, might not be enough to fund an affordable quality of life in retirement.

It’s the thrust of an eye-opening new report from the U.S. Government Accountability Office (GAO), issued this week, which details challenges facing Americans as the retiree population grows.

Tilted “The Nation’s Retirement System: A Comprehensive Re-evaluation Is Needed to Better Promote Future Retirement Security, it calls for a reexamination of how the United States ensures retirement security for its citizens.

“The nation’s retirement system is made up of three main pillars, but fundamental changes have occurred over the past 40 years,” Gene Dodaro, Comptroller General of the United States and head of the GAO. “This has made it increasingly difficult for individuals to plan for and effectively manage retirement.”

In particular, he notes the “marked shift” away from defined benefit to defined contribution plans as the primary type of retirement plan offered by private sector employers, which has increased the responsibility and risk for individuals’ retirement security.

Dodaro also said that when it comes to Social Security, beginning in 2035, projections are that it will be unable to pay full benefits.

“Long-term fiscal projections show that, absent fiscal policy changes, the federal government is on an unsustainable fiscal path, largely due to spending increases driven largely by health care programs, demographic changes, and net interest on government debt,” he warned. “It has been nearly 40 years since there has been a comprehensive federal evaluation of the nation’s approach to financing retirement and the time has come for a new examination.”

GAO’s report focuses on four areas:

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