The Pension Problem

As if we didn't have enough to worry about, here's something else: woefully inadequate pension coverage among private-sector workers. "Coverage of private-sector workers in employer-sponsored plans is shockingly low and shows no sign of improving on its own," reports the Center for Retirement Research at Boston College in "The Pension Coverage Problem in the Private Sector."

How low is shockingly low? Only 42 percent of private-sector workers aged 25 to 64 have pension coverage at their current job, according to the report, down from 50 percent in 1979. This low level of coverage is why one-third of households end up with no pension coverage at all in retirement. And because workers move in and out of coverage throughout their work lives, they accumulate less over time than they would have if their participation had been continuous. Households headed by people aged 55 to 64 have a median of only $120,000 in IRA/401(k) savings versus the $363,000 they would have had if they had continuously participated in a retirement plan.

To solve the problem, the report recommends a new tier of retirement savings. One such proposal is the Harkin Plan: a government mandated, privately managed, defined-contribution pension program.