A little over a year ago, LAGERS board and staff established “A Secure Retirement for All” as our new vision statement. By their nature, vision statements are meant to be lofty, inspiring and something on the edge of being unobtainable. However, every goal, strategy, and decision that is made at LAGERS is driven by this statement.
While this vision statement is something that we utilize to better our organization and help us set our goals, there is more substance to the importance of all Americans having the ability to earn secure retirement benefits. In our country the savings rates are lower than they need to be, especially with the dissolution of many pension plans across the country. A 2015 National Institute on Retirement Security study found that the median working-age household has just $14,500 in retirement savings. This is far from the amount these households will need to achieve a secure retirement.
"A 2015 National Institute on Retirement Security study found that the median working-age household has just $14,500 in retirement savings."
Another study by the Center for Retirement Research at Boston College shows that retiree’s financial fragility will likely be on the rise in the future. Financial Fragility is your ability to withstand a financial shock or hardship. The elderly have long been viewed as being at higher risk of not being able to withstand a financial hardship because they are on a limited amount of income as compared to working households.
"Another study by the Center for Retirement Research at Boston College shows that retiree’s financial fragility will likely be on the rise in the future."
The study further states that current retirees have less risk of a change in their standard of living during a financial hardship. However, the study also concludes that future retirees will likely have an increase in financial fragility because of the decline of income replacement due to inadequate savings. What the study fails to mention is the decline of employers providing a way to access secure income.
According to a study by the Employee Benefit Research Institute, the number of private employers providing defined benefit plans has decreased since the creation of the 401(k) plan in the 1970's. In 1979, 38% of private employers were providing defined benefit plans as all or part of their retirement benefits, and in 2014 only 13% of private employers were providing such benefits. Also worth mentioning is that 34% of employers were providing only a defined contribution (401k) plan. Therefore, only 47% of private employers were providing retirement benefits; the rest of private employers aren’t providing ANY retirement benefits. I believe the limited access to defined benefit plans and the overall lack of providing any retirement benefits are at the root of the potential increase in financial fragility among retirees.
The best way to address the increasing retirement fragility is for every American have the ability to earn secure retirement income.
The best way to address the increasing retirement fragility is for every American have the ability to earn secure retirement income. The first step towards American’s earning secure income is giving employers an efficient way of providing retirement benefits, and it also gives them a tool that will recruit and retain quality workers. A system that will reward longevity and give senior employees the ability to leave the workforce with secure income, and thereby, keeping the lines of promotion open. When an organization has the ability to reward longevity and have healthy movement within the organization, this will give them the ability to recruit and retain quality workers. A system that designed to do all of these functions is a defined benefit plan, like LAGERS.
So, while it may seem like our vision statement is just an inspirational statement, there’s more to it than that. We at LAGERS work hard to provide our employers with a strong and efficient system for recruitment and retention of their employees. We also know that our secure retirement income is extremely important to our members’ and retirees’ future financial security. While our membership is a small portion of all Americans, we are working towards our vision, one employer, one member and one retiree at a time. Click Here for more information about how LAGERS is Good for all Missourians