Retirement in America is in trouble.

Back in the "good old days" of a couple or three decades ago, the American retirement system was described as a three-legged stool. One leg was Social Security, while the second was the company pension and the third was individual savings. Together with the security of Medicare, these three legs would provide a reasonable level of comfort and security in our "golden years."

How times have changed! Today's USA Today carries an article titled "Many have little to no savings as retirement looms." Their assessment: "For many Americans, the golden years are quickly taking on a tin-like hue. After a vicious decade of no growth for the stock market, including two 401(k)-eating bear markets and persistently sky-high unemployment, more Americans are finding themselves in their 50s and 60s with practically no money saved for retirement."

What happened? Well, to begin with, about 80% of Americans find one leg of their retirement stool missing: their pension. Pensions disappeared in the private sector when one company after another discovered they could save money by switching to a 401(k) defined contribution plan. Employees thought it sounded great. They would contribute a part of their salary, their employer would match their contribution (up to a point), and they would get to have a say in the management of their retirement funds. What could go wrong?

Well, let's begin with the fact that the average employee is nowhere near the financial wizard they thought themselves to be. The folks who made a career of managing the "old fashioned" defined benefit pension plan really did do a better job of managing money than the average do-it-yourself investor.

USA Today points to an example: :"The people [financial advisor Joel] Redmond encounters most who are lacking sufficient retirement savings weren't necessarily delinquent or negligent. Many had money saved but were wiped out by the sour stock market in the past decade and poor investment strategies, Redmond says."

"That's what happened, in part, to Robert and Connie Cabana of Tampa, who are both in their 60s. Robert built up a sizable 401(k) working as a financial executive at Verizon. Connie was a business assistant for a local irrigation supply company. Connie was laid off four years ago; Robert was let go three years ago."

"But the serious hit to their retirement, which wiped out half their 401(k) savings, resulted from the stock market and an overexposure to risky stocks, they say. Now, 75% of their 401(k) is gone, and they have "very little" left, Robert says."

Then there's the matter that their employers probably never mentioned: To provide the same level of retirement income, those in 401(k)-type plans must accumulate twice as much money as in a traditional defined benefit pension plan. (For a complete explanation of this see "What's so bad about 401(k)-type plans?") 

Nobody bothered to mention that:" A 65-year-old retiree would need to have $1.1 million saved to draw $50,000 a year in inflation-adjusted dollars, assuming 3% inflation and a 5% annual return from investments. That's if the investor is lucky enough to get a 5% return, which, given the flat-line returns of stocks the last decade, might give some pause."

That's a tough order considering that: " More than half of all workers, 56%, say they have less than $25,000 in savings, according to a survey by the Employee Benefit Research Institute." As for retirees: " More than half of retirees, 54%, report they have less than $25,000 saved. That's up dramatically from 2006, when 42% said they had less than that."

What's the meaning of all of this for those of us lucky to be members of the NY State Teachers' Retirement System? Simply this: There is little chance that the traditional pension will make a comeback in the private sector. Those without a pension will more frequently ask why they should pay taxes to provide public employees with a benefit they no longer have any hope of enjoying themselves.

We must stay vigilant--and politically active-- as the retirement "race to the bottom" continues.