The golden years for most Americans appear increasingly threatened by the global financial crisis. Retirement accounts have lost from $2 trillion to $4 trillion as stocks have tumbled nearly 50% from their peak in 2007. For Americans facing retirement, the details of how these plans work may be fuzzy, but the big picture is clear: Whatever comfortable cushion they may have had is now gone, and the process of building it back up will be arduous and long -- perhaps too long for employees who are nearing retirement age.

The pain isn't limited to individuals with plummeting 401(k)s. Sponsors of private and public pensions -- which typically invest between 60% and 70% in equities -- are also finding their accounts billions of dollars below minimum requirements. The financial crisis "is affecting all types of retirement plans very similarly because they're all invested in the same assets -- stocks and bonds," says Peter J. Brady, senior economist at the Investment Company Institute (ICI), a Washington, D.C.–based association of investment companies and mutual funds. "People have a lot less in their accounts than they had a short period ago."

The ripple effect of shrinking retirement accounts and underfunded pensions threatens to undermine the broader economy as older Americans delay retirement, local governments raise taxes, and companies challenged with withering pension balances lay off workers in response to the shortfall.

The crisis has many retirement experts calling for change -- some for tweaks to the existing system, others for full-blown retirement reform. To supplement Social Security, American workers have a choice of two types of employer-sponsored retirement plans: defined benefit plans, in which an employer promises to take care of employees when they retire; and defined contribution plans, in which employers help employees accumulate their own retirement funds.

Since Congress amended the tax code in 1978 to accommodate defined contribution plans, the bulk of private employers have shifted to them, with plans such as the 401(k), and away from traditional pensions. Most public employees, however, are still covered by traditional pensions. "Thirty years ago, half the workforce had a pension plan, and it was a [defined benefit] plan," notes Olivia S. Mitchell, executive director of the Pension Research Council and a professor of insurance and risk management at Wharton. Today, about half of the American workforce is covered by an employer-sponsored retirement plan, but the majority of them are defined contribution plans, Mitchell says.

About 22 million workers are covered by defined benefit plans today, while about 66 million are covered by defined contribution plans, according to the Employee Benefit Research Institute (EBRI), a nonprofit research organization in Washington, D.C.