America’s retirement crisis could cost the federal and state governments an estimated $1.3 trillion by 2040, according to a new analysis.
Inadequate retirement savings will result in higher public assistance costs, decreased tax revenue, lower household spending and a decline in standards of living, according to a report done for the Pew Charitable Trusts.
The anticipated costs — $964 billion for the federal government and $334 billion for states between 2021 and 2040 — are “relatively shocking,” John Scott, director of Pew’s retirement savings project, said during a presentation Thursday.
The shortfall is being driven in part by demographics, with the share of households including someone 65 or older that has less than $75,000 in annual income — a level the report said indicated financial vulnerability — expected to jump 43% to 33 million by 2040.
The report found that minor increases in savings habits by those “vulnerable” households could alleviate the anticipated strain to federal and state budgets. Saving an extra $140 a month, or about $1,685 annually, over 30 years, the retirement savings gap and additional taxpayer burden could be eliminated, according to the analysis.
The research assumed an inflation-adjusted return of 5% on assets that shifted from a more aggressive to a more conservative portfolio over three decades.
The study pointed to the growth of state-sponsored automated retirement savings accounts, which have been adopted in 12 states, as a way to help as many as 56 million private-sector employees without employer-sponsored retirement savings plans. Such auto-IRA programs usually automatically enroll employees, who can then opt out.
Unlike many retirement savings programs at large private companies, auto-IRAs are Roth accounts, funded with a small percentage of a worker's after-tax paycheck. Users aren't able to lower their taxable income by contributing to retirement savings on a pretax basis, as workers can in 401(k) plans, and there are no matching contributions from employers.
Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.
From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.
"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.
Chair also praised the passage of stablecoin legislation this week.
Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
