social-security

The Pension Benefit Guaranty Corporation (PBGC) was created by Congress in 1974 to insure all private-sector pensions against employer bankruptcy and underfunding. By 2006, the PBGC was responsible for insuring pensions for 44 million working and retired Americans.

As baby-boomers have aged, so has the population of the United States. This has consequences, in particular for the nation’s labor force. In the 20 years from 1990 to 2010, the labor force in the United States grew 24.4%, keeping pace with the country’s population growth of 26%.  From 2010 to 2030, however, while the population will climb an additional 17.5%, the labor force is expected to grow only 10.5%.

As the baby boomer generation reaches retirement age, U.S. policymakers are struggling to ensure the long-term viability of Social Security. In 1990 there were roughly five people of working age for every retiree; by 2035, that ratio is expected to diminish to three to one, according to the 2011 Social Security Board of Trustees report.

The societal shift from defined retirement benefits (pensions) to contribution retirement savings mechanisms — for example, the 401(k) — has placed a greater burden on the decision-making capacity of Americans. As this dynamic continues to unfold, evidence suggests that many people are not making wise investment choices for their retirement money.

Studies have shown that inequality in the U.S. has been on the rise for decades, with the top earners enjoying astronomical gains and average Americans coping with stagnating incomes. These studies typically rely on annual income data, however, which may overstate inequality: low earners in one year may be high earners the next.

Retirement planning decisions are growing increasingly complex in America, and older workers are facing critical financial choices in the latter years of their professional lives. Making optimal choices, however, requires an increasing level of financial literacy and knowledge.