This post by Robert Powell from MarketWatch (The Wall Street Journal) discusses a bleak outlook for America’s state of retirement security. In my opinion, the most important thing mentioned in this article is how the lack of financial education among workers can directly affect their retirement wealth. Many people hold misguided expectations about their retirement portfolios and believe they have more in Social Security benefits, employer pension plans, or health and long-term care coverage than they really do (Helman, VanDerhei, & Copeland, 2007). What’s worse, this misinformation can actually drive planning behavior so much that ill-informed workers, rather than doing nothing, are losing significant portions of their pension wealth because they take inappropriate and detrimental action (Chan & Stevens, 2003). Not everyone has expendable income to play with, yet the financially-informed worker is 5 times more likely to respond to pension incentives accordingly and increase their pension wealth (Ekerdt & Hackney, 2002).

The article highlights many other topics that are important to educate yourself about. We need to fix Social Security, we need to contribute more to our own 401(k)s and retirement savings, we need to make sure more workers are covered by pension plans, and so forth. Yet, many of the suggestions for fixing these issues are based on what’s feasible for the typical, middle class worker.

Should you really force people to put part of their wages into an IRA when they need every penny of every paycheck to cover the costs of food, shelter, and clothing? If yes, can you tell them what percentage of their income they must contribute? Are you then required to financially educated them or give them free access to financial experts? Will they even live long enough to reap the benefits of their automatic IRA account?

Longevity may be increasing in this country but we should always be cautious of statistics. Longevity varies widely by gender, race, income level, health status, region of the country…I don’t know, pick something. In fact, life expectancy has actually declined for women between 1997 and 2007 which is extremely rare in developed countries. “The nation has experienced a widening gap between the most and least healthy places to live. In some regions of the country, men and women are dying younger on average than their counterparts in nations such as Syria, Panama and Vietnam.”

As with any policy change or “universal” action, all parties who will be affected by the changes must be considered. I encourage you to read Powell’s article and to approach his solutions cautiously. Though it cannot be the only answer, there is one that seems to me most helpful and realistic: Financial education for all.