Fix the stool

How Business Can Help Us Avoid the Looming Retirement Crisis
By Denise Bowyer 

I am a business leader, a baby boomer, and a consumer. In each of these roles, I am concerned about retirement security -- or should I say, the lack of it? But it is in my role as a business leader that I have the most concern. In business when vision and business plans collide, disaster normally follows.

Like me, many hard-working Americans hold a vision of retirement based in financial security. I imagined a comfortable seat in a comfortable home on a sturdy three-legged financial stool. For most Americans today however, that sturdy three-legged stool, made up of social security, employer pensions and private savings, is broken, wobbly and missing a leg or two.

Business leaders, working Americans and the policy makers who represent us are faced with a choice. We can either change our vision, or fix the problem.

Business is driven by confidence that a consumer will want to -- and be able to -- to purchase a good or service. A survey of small business owners recently released by the American Sustainable Business Council (ASBC) showed that 70 percent believe that the lack of retirement security is a threat to business and the overall economy. They understand that business cannot be sustained unless it has a sustainable customer base, including older Americans.

The solution should be a combination of public policies that strengthen social security, ease the path for employers to offer and administer transparent defined benefits or defined contribution plans, promotes personal responsibility and financial literacy. Here's how to do it one leg a time.

The first leg is Social security. It touches the lives of most Americans, and today for many working families it is the only leg of their retirement stool. At its founding it was not meant to be the only source of income, but to replace only about 40 percent of a workers income for retirement. That's a little more than half of the 70 percent of pre-retirement income that research suggests for a decent sustainable retirement. 

The mechanism of social security, equal employer and employee contributions coupled with payroll deduction, have proven to be a winning combination for 57 million Americans currently receiving benefits to the tune of $1,200 per month. Strengthening social security should be the single issue that all business people agree on.

There is no longer a universal second leg on the retirement stool. Employer-sponsored defined and contributed benefit plans are weak and/or broken. It is business' interest to protect the last bastion of defined benefits still in existence.

It is also in business interest to find cost effective solutions in implementing and executing employer sponsored plans. In the ASBC survey of small business owners, cost not values was cited as the single biggest obstacle to offering a retirement plan. There needs to be a way for public policy to reward small business who would offer a portable, universal, transparent, retirement supplement to their workers. 

America's future retirees and older business customers are the 50 percent of workers without an employer sponsored retirement plan. The average balance in a 401K today, hovers around $80,000. Half of Americans don't even have that option. A sound second leg option would go a long way towards helping the 67 percent of small business owners who do not currently offer a retirement plan.

The third leg of the retirement stool is supposed to be personal savings. Unfortunately, for most workers, savings amounts to three percent of their retirement needs at best. Today, most workers use savings for emergencies not retirement. In a time of flat and declining wages, saving for retirement is not realistic.

The solution to the lack of financial resources for retirement chosen by many who can is simply to work longer. For some of course, that is not an option. And even those who do often wind up being laid off from career jobs and forced to take low-wage jobs.

Business leaders are some of the best voices offering solutions to real life issues that affect our communities and impact our bottom line. We should listen to them. A wobbly, one-legged stool simply cannot support business or our customers for the long haul.

Bowyer is Vice President of American Income Life Insurance Company, based in Waco, TX