Retirement security in the United States: The need to reform

The Social Security Program in the United States was a major public policy initiative geared towards ensuring all United States citizens would have a minimal level of retirement security. Combined with employer-provided pensions and personal savings, these components make up the three-legged stool metaphor that characterizes the shared responsibility retirement system framework in the United States. However, academics, economists and financial experts alike are questioning the stability of this system and there is growing evidence of a retirement crisis emerging. The recent disappearance of pensions in the aftermath of the Great Recession coupled with the fact that the average working household has virtually no retirement savings clearly has contributed to the current state of affairs. Further, nationwide unfunded liabilities for public pension and retiree health care range anywhere from $1.4 to over $4 trillion and there is increasingly the danger in the U.S. that a two-tiered retirement divide is emerging. Most public pension plans guarantee retirees a set income for the rest of their lives, indexed for inflation. These types of benefits have mostly disappeared in the private sector. In the chapter, the history, intent and current state of the three-legged stool approach will be addressed to provide greater context for examining potential solutions and reforms.