Americans Must Save for Retirement

Listening to NPR's Marketplace this morning, I heard Chris Farrell emphasize the need for Americans to save for their own retirement. Farrell said with pensions faltering and the 401Ks that were supposed to replace the pension system falling far short of expectations (and needs), Americans cannot rely on Social Security to be their safety net. He asserted we must save - at least 20 percent of our earnings.

Farrell did not discuss a few problems with saving.

• Current long-term CD rates hover between .09 and 1.99 percent at my local banks. Given inflation rates, this is a negative return.
• Unlike dividend income, every cent of interest on (non-IRA) savings is taxable.
• Wage earners need to pay for taxes, food, clothing, shelter and transportation first.

Investing is a form of saving, so perhaps that is the answer? I would have more confidence in it if Wall Street wasn't an insiders game in which traders constantly manipulate market prices for short-term gains (short-term as in daily/weekly rather than months).

Every form of savings and investment contains risk. Diversification of assets remains the best hedge against risk. But make no mistake - our failure to control the financial industry that continues to build on top of the fault lines in the system it created has increased risk across the board.

Yes, I will continue to save, to invest, to diversify. I just have a lot less faith than I used to have that my conscientious efforts will bring me financial security.

Perhaps the strongest financial tool available to us is to recognize that debt is a slave master and to avoid it like the plague. That includes credit card balances, home equity loans, student loans, installment debt, lines of credit attached to checking accounts.

Note: Marketplace reported Americans have decreased their credit card debt by 16 percent and raised their savings by 5 percent since the 2008 financial meltdown.