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John Bogle, founder of The Vanguard Group.
Mark Lennihan—AP

Talk of a retirement crisis in the U.S. may understate the problem, Vanguard founder Jack Bogle suggests.

Asked at a conference Thursday if there’s such a crisis, he replied: “No, not at all—there are three.”

He ticked them off for attendees at the annual gathering of the Bogleheads investing community, which is devoted to his principles of simple, low-cost investing:

  • No. 1 is the financial squeeze on Social Security, which is projected to reach a point at which the system can’t meet obligations to future retirees in full.
  • No. 2 is a similar underfunding among pension plans at corporations and at state and local governments—which Bogle said is exacerbated by some plans “idiotically” assuming unrealistically high investment returns such as 7.5% a year.
  • No. 3 are problems among the 401(k)s and other defined contribution savings plans that are increasingly the primary workplace retirement plans for Americans. Issues include high expenses in some plans and instances in which workers are given bad advice by brokers and other financial advisers to roll money from their 401(k)s into higher-cost investments.

One positive development Bogle pointed to was this year’s adoption by the U.S. Department of Labor of the “fiduciary rule” that will require financial professionals to put the interests of retirement savers above their own, such as when they discuss rollovers from 401(k)s.

But he wasn’t encouraging on how the country would address some of the other challenges. For instance, he noted that companies have a financial incentive to be “very stingy” with pension contributions because those come out of earnings.

On Social Security he said the system’s finances could get a big boost from changes that may be rejected as “politically sensitive,” including adopting a less-generous approach to calculating cost-of-living adjustments, raising the maximum annual earnings subject to Social Security tax, and raising the age for full retirement benefits further from the current range of ages 66 to 67. (Bogle describes such changes as “almost invisible,” but some workers and beneficiaries would no doubt disagree.)

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So what can individuals do? It comes back to following simple rules like saving more money and sticking to low-cost, broadly diversified investments for the dollars they control, Bogle says. Unfortunately, he says, “most people do not do it.”