THE BLOG
10/28/2016 04:35 pm ET Updated Oct 29, 2017

The Looming Retirement Issue Absent From The Political Debate

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This year's presidential contest is truly one for the ages. The candidates for our country's highest office have certainly focused on many worthy topics including economic growth, national security, immigration, international trade and foreign policy. Unfortunately, the narrative has often veered off into topics more appropriate for TMZ than Face The Nation. Hacked emails and predatory sexual behavior dominate the political discourse.

One national issue that has gone virtually unnoticed this election cycle is the retirement income crisis. There are an estimated 10,000 baby boomers retiring every day, and the vast majority simply don't have the means to sustain themselves through retirement.

The statistics are alarming. According to the Federal Reserve, the median balance of retirement accounts held by Americans who are saving for retirement totals less than $60,000. The news is slightly better for those closer to retirement, as the median value for Americans aged 55 to 64 years old is $103,000. A full one-third of Americans have no retirement savings. Absent any other factors, these paltry retirement account balances plus Social Security benefits will combine to provide many retirees a meager lifestyle upon retirement. But as is typically the case, there are other factors influencing the prospects of future retirees.

Many retirees and near retirees rely on Social Security as their primary means of income, but that income stream is increasingly at risk. The Social Security system is woefully underfunded already, and the population demographics impacting the program worsen by the day. The ratio of people funding Social Security versus those drawing on its benefits is falling and will continue to fall well into the future. Political courage needs to be summoned to shore up this vital social safety net. Unfortunately, summoning political courage is about as likely in this political environment as summoning the nearest leprechaun or unicorn.

Advances in medicine and healthier lifestyles are resulting in people living longer lives. While this is certainly good news, it means that people need to save even more for retirement than they have in the past. Health care costs are rising, too -- and while we may be living longer, advances in medical science suggest that we will continue to see increased costs concentrated in the last year or two of one's life.

Years of record low-interest rates are punishing net savers, which is another factor requiring much higher savings rates than in the past. The financial crisis led many people saving for retirement to move from higher-risk equities to safer fixed income securities. With returns virtually non-existent in low-risk fixed income securities today, savers are not realizing increases in wealth and greater retirement security. While rates may rise in the near future, providing some relief, the likelihood of continued lower-than-normal interest rates is high for the foreseeable future.

Simply put, there is a perfect storm of factors interacting to hasten a generational disaster of epic proportions.

For many, the answer to underfunded retirement plans is simply to work longer. Unfortunately, the best-laid plans are subject to change. According to the Employee Benefit Research Institute, the typical American worker retires earlier than planned due to health problems or disability, downsizing, or having to care for a spouse or family member. In essence, the "work longer" option simply doesn't exist for many people.

Earlier this week at the LIMRA Annual Meeting (a worldwide research, learning and development organization focused on the life insurance profession), Condoleezza Rice told the attendees "this election is beneath us." The reality is that we face a retirement income crisis of unprecedented proportions, and it is truly unfortunate that this critical topic has gone largely unnoticed in the campaign.

On a positive note, this crisis can be mitigated. Australia, a nation founded at about the same time America declared its independence from England, has made great progress in addressing its retirement income crisis. They have a combination of a government-mandated savings plan called the Superannuation Program and an Age Pension Program (similar to our Social Security System). With those tools in place, Australians have virtually eliminated their retirement income crisis. We could learn a lot from a nation originally founded as a penal colony and now leading the way in securing the futures of their citizens.