An historic event for America occurred on June 4-5, 1998. In a precedent-setting session, the president, congressional leaders, representatives of state and local government and leaders from the private sector gathered to discuss retirement savings issues at the National Summit on Retirement Savings. Their charge was to build public awareness of the importance of saving for retirement and to debate legislation and regulatory reform. Why the widespread interest in this seemingly personal topic?
It`s no secrets that Americans have a reputation for spending rather than saving. And it`s no wonder. America has long been a consumer society.
With the proliferation of advertising messages that bombard consumers daily, it`s difficult to resist the lure to spend. In addition, U.S. tax policies have traditionally encouraged consumption.
If you buy a $500 television set, you may pay sales tax on the purchase and then enjoy it for years. If you invest $500 in stock, you are taxed on the dividends and any gains in the stock price – eroding your potential profit for the life of your investment.
Savings disincentives like this have created some startling statistics. According to the 1998 Retirement Confidence Survey conducted annually by the Employee Benefit Research Institute, 37% of Americans have amassed a retirement egg of less than $50,000 and 10% have saved less than $10,000 for their golden years.
To further complicate the problem, Americans could be living much longer in retirement than their ancestors.
The same survey shows that Americans are also moving toward their later years with high hopes – 72% of responders want to retire by the traditional age of 65.
Those hopes, coupled with the lack of financial preparation and the tenuous status of Social Security, reflect some harsh realities. In fact, inadequate finances may prevent many hopeful retirees from achieving their dreams.
A number of potential solutions to the savings crisis were bandied about at the summit.
Proposals included everything from raising the annual ceiling on IRA contributions from $2,000 to $4,000 to suggestions for ensuring Social Security solvency through the next century.
Finding your solution
Even though its likely that relief is on the horizon from the political powers-that-be, here are some steps you can take now to ensure your retirement security.