(The author is a Reuters columnist. The opinions expressed are his own.)
By Mark Miller
CHICAGO Bet you didn't know this is National Save for Retirement Week. Unless your boss is marking the occasion by herding the staff into retirement education seminars, it's just another one of those manufactured calendar events that tend to fly right by us.
There are other national awareness weeks in October - for fire prevention, school lunches and forest products. And did you miss National Boss Day (October 16) and International Talk Like a Pirate Day (September 19)?
I don't mean to diss saving for retirement - we do face a retirement savings crunch in the years ahead. Social Security replaces less income than in the past. Defined-benefit pensions are disappearing. Longer lifespans mean many will need to fund longer retirements. And healthcare costs can be overwhelming.
National Save for Retirement Week was established in 2006 with a U.S. Senate resolution introduced by Republican Senator Gordon Smith and Democratic Senator Kent Conrad, and it still enjoys bipartisan support. It's sponsored by two organizations that provide defined-contribution plans to public-sector workplaces, and a long list of financial services companies pile on with marketing and public-relations pushes tied to the event.
Saving for retirement is a worthy cause, especially for young people who may view retirement planning as an abstract concept. An early start on retirement saving - and an awareness of your rate of contribution - will have a far greater effect on the size of your nest egg than market returns or asset allocation.
Still, the nation's retirement challenges won't all be overcome by simply remembering to save, and the current self-directed retirement system isn't getting the job done for millions of Americans. It may work fine for affluent households, who have more income to plow into 401(k) and individual retirement accounts and get bigger tax breaks for their contributions. High-income workers also are more likely to have employers who provide generous matching contributions.
But even the industry's own data points to a yawning retirement savings gap. The Investment Company Institute reports that near-retirement households with annual incomes over $200,000 had saved an average of $885,000 in 2010, compared with just $53,000 in savings for households earning $45,000 to $69,000.
Only 42 percent of private-sector workers age 25 to 64 have any type of retirement plan coverage in their current job, according to the Center for Retirement Research at Boston College. The rate of participation in a workplace plan for African-Americans and Hispanics in 2010 was 43 percent and 27 percent, respectively, compared with 50 percent for white workers, according to the Economic Policy Institute. And many who do enroll in workplace plans don't understand how high fees can eat into their long-term returns.
Clearly, retirement security isn't just about saving. How about adding some of these events to next year's calendar?
1. Index Fund Week. Retirement savers come out far ahead in the long run when they invest in low-cost index funds that buy wide swaths of equity markets instead of higher-fee actively managed funds that pursue specific themes or market sectors - the numbers have borne this out repeatedly. This commemorative week could raise awareness that it is easy to use index funds in any IRA, and that many well-run 401(k) plans have them, too. The campaign would also encourage workplace retirement savers to demand index funds in plans that don't already have them.
2. Social Security Comprehension Week. For many middle-class Americans, Social Security will be the entire retirement ballgame. Let's have a week devoted to reassuring Americans that Social Security's financial future isn't as dire as they've heard, and to helping them understand how to get the most from the program. Sponsors would offer a free software tool allowing couples to plug in their birth dates and projected benefits to learn how they can boost lifetime benefits through delayed filings.
3. Work Longer Week. This campaign dispels Americans' glum, widely held view that they'll never be able to retire. The more cheerful message: Working even a few years longer can do the trick. Each additional year of work means fewer years relying on a nest egg to fund retirement, more years of contributions to retirement accounts and a higher monthly Social Security income through delayed filing. Morningstar research shows that delaying retirement for two years boosts your odds of achieving retirement income goals by 37 percent; a three-year delay improves the outlook by 55 percent.
The campaign would also acknowledge that working longer isn't a strategy that works for everyone - health problems and job loss often intervene.
4. No Lump Sum Week. American retirees have a bad tendency to take the money and run. This awareness week would encourage workers lucky enough to have a traditional pension to take the benefits in an annuitized stream wherever possible. Retirees with 401(k) nest eggs would learn about the benefits of partial annuitization via single premium income annuities.
5. Tap Your Equity Week. Home equity is the largest asset on the balance sheets of most middle-class retirees, and there are responsible ways to use it to support retirement. Tap Equity Week would promote the benefits of downsizing and encourage the careful use of reverse mortgages.
Here's hoping concerned legislators and the retirement industry - with an eye to a more holistic approach to retirement planning - will get going on some of these events.
And don't forget: Today is Reptile Awareness Day.
For more from Mark Miller, see link.reuters.com/qyk97s
(Follow us @ReutersMoney or here; Editing by Lauren Young, Meredith Mazzilli and Douglas Royalty)