The current recession has revealed significant and dire shortcomings in the nation’s approach to retirement savings, TIAA-CREF has said.
The organization recently reported on research conducted by McKinsey and Company which found that the average American couple will fall $250,000 short of their necessary savings and will only have approximately two-thirds of the income that they will need at the time of retirement.
"It’s time to think of 401(k)s as income in retirement accounts, and to begin with the end in mind, by asking how much income in retirement people need," said Roger Ferguson, TIAA-CREF’s chief executive.
Ferguson recommends a holistic system where incentives are offered to employees and employers to encourage contributions of between 10 and 14 percent of annual income to help people reach the target of replacing 70 percent of pre-retirement revenue.
He also believes that companies should offer a wider variety of 401(k) investment options to provide appropriate diversification in order to properly manage risk.
Moreover, Ferguson feels that the U.S. should provide opportunities for people to begin saving for medical expenses associated with retirement.