Once in office, will President Obama have the political guts to attack the coming retirement crisis? The United States has a severe savings problem, one so hardwired into our culture that it is institutionalized. You've heard that before, perhaps you've even warned your clients about it. The bottom line is that if you are using promised future cash flows from a client's defined-benefit plan in your retirement calculations—employer- or government-sponsored—you had better be careful. Retirement promises will likely be broken—and sooner than you think. In the private sector, more and more DB plans are shutting down or reducing their payouts as future obligations are overwhelming companies' ability to pay. The government itself is also facing some tough times ahead: It is running historic deficits and, recently, the national debt has been growing at a pace never before seen in this nation's history. (And that's saying something.) The promises on the books for future payments from entitlement programs—from Social Security to Medicare— already represent $53 trillion. That works out to about $175,000 per person.

And, just like the leaders they elect, Americans are spendthrifts. Indeed, the baby boom generation is in dire straits when it comes to retirement savings. Some two-thirds of baby boomers are unprepared for retirement, according to esteemed consulting and research firm, McKinsey & Co. The firm, which released a report in November titled “Why Boomers Will Need to Work Longer,” based its figure on estimates of the kind of income and assets boomers would need to maintain 80 percent of pre-retirement spending.

McKinsey joins a chorus of investment experts and researchers who have asserted that America’s baby boomer generation is unprepared for retirement—and will have to work longer than expected. But if there was any doubt before, the current economic rout doesn’t leave much room for skeptics now.

“Even before the recent credit crunch, the boomers’ ratio of debt to net worth was 50 percent higher than the silent generation’s at the same age,” write the authors of the report, published in early November. “Sharply declining house prices have caused this measure of boomer indebtedness to surge.”

“Social Security trust funds are a misnomer, and, in fact, they're an oxymoron,” says Peter G. Peterson, a former secretary of commerce and chairman of the Blackstone Group. “They shouldn't be trusted and they're not funded.” (For more on the potential demise of private and public pensions, see Registered Rep.’s November issue, online now.)

The scary part is, many baby boomers are not even aware of how unprepared they are, the McKinsey authors note. “In our survey, about half of boomer households expressed confidence in their financial future. But by our calculations, less than half of those confident households are adequately prepared.”

What remedy does McKinsey suggest? Like others have before them, the authors prescribe working longer. But McKinsey provides specifics: If baby boomers increased the median retirement age to 64.1 years of age by 2015 from just 62.6 today, they could continue accumulating assets and avoid tapping them until age 70. That would vastly reduce the share of unprepared households—to 40 percent from 69 percent if households don’t tap their home equity; to 31 percent from 62 percent if they do, says the report.

Incidentally, this delay would help the economy and social security too, by generating $12.9 trillion more in GDP through 2035, increasing taxes and delaying draw downs on government benefits.

That said, McKinsey notes that there may be health, legal and institutional barriers to longer careers for boomers.