It looks as if pensions aren’t going to be enough to secure a good retirement for most Americans. According to a study from the Employee Benefit Research Institute (EBRI), less than half of men (42.6 percent) and just over a quarter (27.9 percent) of women aged 65 and over received annuity or pension income in 2007 as part of their retirement.
However, employers still spend a considerable amount (nearly 48 percent) of their total benefit spending on retirement benefits. This means that in the future employers will most likely have to reduce pension benefits even further to cut costs. U.S. automakers are already facing this problem as they t
ry to renegotiate pension benefits with the United Auto Workers Union to avoid bankruptcy. (Read article here)
If today’s workers want a stable retirement to come home to, one option is to rely on personal retirement accounts like 401(k)s. Even today's market conditions (which, by the way, are just a temporary blip on the radar screen) should not deter workers from saving regularly into a 401(k), IRA or other similar type of retirement account. Increasingly more people are participating in 401(k) plans, and the EBRI study notes, “[t]his trend has had a positive impact, in that many workers who previously had no retirement plan at all now at least have access to a tax-favored plan.”