The 401(k) concept always looked good on paper. The thinking went that workers would have the discipline to save enough money to more than match Social Security in their retirement years.
The facts show, however, that the actual outcome for most American workers will be far different.
More than 40 percent of workers don't even have access to retirement plans at work, while a combination of high fees, turbulent markets, poor investment decisions and inadequate contributions will force more and more Americans to rely more heavily on other sources of income in retirement, namely Social Security.
This seems likely to be a slowly evolving train wreck for the next generation of workers.
"If we stay the course, we'll retire with less than our parents and our children will retire with less than we did, reversing many of the gains of the past fifty years," according to Robert Hiltonsmith, a mathematician and economist who has studied the problem.
In the middle of the last century, the conventional wisdom said most Americans would retire on Social Security, personal savings and lifetime pensions. That system was oft described as the "three-legged stool."
But the percentage of private-sector workers with defined benefit coverage has decreased from 88 percent in 1983 to 36 percent today, and that number is rapidly sinking.
With the decline of unions, the rise of service-sector jobs and passage of the Revenue Act of 1978 creating 401(k)s, employers have quickly abandoned traditional pension plans in favor of contributions to individual retirement accounts. Now many firms are abandoning those contributions as well.
The number of workers in individual retirement plans has gone from 12 percent in 1983 to about 60 percent today. Employer contributions have dropped from an average of $2,140 per employee in 1981 to $1,404 today.
Meanwhile, 401(k) investors too often pick the wrong investments, are subject to high mutual fund fees, borrow heavily against their accounts and are regularly decimated by market crashes.
The result: The median 60-year-old 401(k) investor, the person contemplating retirement, has saved about $60,000, according to PolitFact.com.
Meanwhile, the average Social Security recipient receives $14,748 a year. A $60,000 nest egg might generate about $2,400 in annual income, for a grand total of about $17,000 — and that's at today's benefit levels.
All of these trends are likely to worsen. During the recession, millions of Americans lost their jobs, some for years on end, and millions of others lost their homes or the value they thought they had in them.
Tens of millions have seen their family incomes trimmed, while younger workers are putting off investing in their retirements due to massive educational loan payments. And those are the lucky ones who can even find a decent job.
Social Security was never meant to be the sole source of income for retirees, only a safety net supplemented by pensions and savings.
But, as many experts now fear, it will end up being the major or only source of income for more Americans going forward.
All of which will heighten the stakes next year when Congress is expected to tackle the underfunded Medicare and Social Security programs.
What does the future hold for American workers? Looking at the numbers, one has to wonder. And to fret.
The opinions expressed in this column reflect the views of the ownership and the editorial board.
* This editorial was corrected on 05.22.12 to eliminate the following paragraph which was incorrect: The Employee Benefits Research Institute estimated in 2009 a person should have saved $250,000 by age 60, but many investment counselors would say even that is far from adequate.