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America’s Rehearsals for Retirement

As the first wave of America’s baby boomers begins to retire, the retirement system is revealing its flaws. While a recent international comparison gave the US a passing grade of C, for a large and growing number of Americans, the system is failing.

BERKELEY – As the first wave of America’s baby boomers begins to retire, the retirement system is revealing its flaws. More than half of all workers (and more than 60% of low-income workers) are at risk of lacking sufficient savings to maintain their living standards after they stop working. In a recent international comparison, America’s retirement system received a passing grade of C; but, for a large and growing number of Americans, the system is failing.

The slow recovery from the Great Recession has exacerbated the challenge. Homes are most Americans’ major retirement asset, and, despite a recent pickup, housing prices are still 28% below their 2006 peak, while 28% of all homeowners owe more on their mortgages than their property is worth.

Discretionary employer retirement plans are a major pillar of America’s retirement system. But nearly 16 million Americans are either unemployed or have dropped out of the labor force, while more than half of the jobs created during the recovery are low-wage positions that usually do not offer such plans. By contrast, most of the 625,000 public-sector jobs lost during the recovery offered generous pensions.

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