The stock market is booming, but $57 billion disappeared from 401(k) accounts in 2011. Why? Without emergency savings, millions of Americans who found themselves out of work, on the verge of losing their homes, or facing other financial emergencies were forced to raid their retirement accounts. In addition to incurring the standard penalties and taxes required when a worker does so, these individuals damaged their long-term economic prospects.
Today, half of Americans have no retirement assets, and those who do often neglect their rainy-day fund in favor of longer-term goals. President Obama wants to make a difference, and he announced the creation of a new "starter retirement account" — the "myRA" — in his State of the Union address earlier this year. Yet despite the best intentions, the administration's current strategy to boost savings will likely fail. That's because President Obama overlooks, as does Congress, a crucial point: The first step toward increasing retirement security is to stop thinking, and talking, so much about retirement savings.
The looming retirement-savings crisis is well documented. The National Institute for Retirement Security estimates that the nation faces a savings deficit of $6.8 trillion to $10.4 trillion and that the average working household has just $3,000 saved for retirement; just $12,000 in the case of near-retirement households. Low-income workers, workers of color, and those who are working part-time or for very small employers are less likely to have an account at all. Even for those lucky enough to have an employer-based account, hard times mean tough choices. According to personal finance firm HelloWallet, about one-fourth of all households will "breach" their retirement savings to pay for non-retirement needs.