12:27 PM Eastern - Wednesday, July 25, 2012

$5 A Day? #retirement-security

Nearly half of middle class workers can expect to live off a food budget of just $5 a day when they retire. Why?

"The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers will be poor or near poor in retirement," says retirement policy expert Teresa Ghilarducci in a recent New York Times op-ed.

This downward spiral stems from the breakdown of the three-legged stool of retirement traditional pensions, Social Security, and personal savings that leaves a growing number of older Americans without adequate retirement savings.

Workers need approximately 20 times their annual income to maintain their living standards in retirement. However, most Americans aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.

So what does this mean? People will need to continue working well into their golden years with significant wage cuts and the looming possibility of being laid off or falling ill.

Ghilarducci says it's time to shift away from the failed do-it-yourself retirement model promoted by 401(k) advocates to one that "would create guaranteed retirement accounts on top of Social Security." Read the rest of Ghilarducci's op-ed for the New York Times here.

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