More Americans than we like to imagine have gone far too long without opening their 401(k) statements.

This passive denial of the recession’s effect on retirement savings doesn’t alter negative returns on accounts large or small. Knowledge is a first step toward action, so we’d be better off to open the envelopes and face our fiscal shortcomings head-on.

The same holds true for the city of Atlanta, which is, thankfully, receiving the bad news of just how severely the financial markets’ downturn and poor decisions from previous years have ravaged the city’s pension plans for police, firefighters and other workers.

Next, the city must face head-on the rugged task of reducing plan costs. That will mean making future retiree benefits less sweet. In so doing, the city will follow the private sector, which has been sipping this unsweet tea for decades as companies shifted workers to less-costly retirement plans.

A sobering report released last week by the pension reform panel convened by Mayor Kasim Reed clearly laid out the city’s red-ink problem.

In part, Atlanta’s payments toward pensions have risen 13 percent annually during the past decade. The city paid out $144 million for pensions last year, up 162 percent from 2001’s $55 million cost.

Worse yet, the gap between the funded and unfunded portions of the pension plans has grown 21 percent a year since 2001. That means the plans are now barely more than halfway funded. In 2001, 83 percent was covered.

In addition to sizing up the shortfall, the panel identified possible solutions. The group wisely stuck to actuarial matters and left the hard calls about the best way forward to the city’s political leadership.

For the sake of taxpayers, the city must choose quickly on how to climb out of its pension hole. Paying roughly 20 percent of the city’s general fund budget for pensions is simply not sustainable. Fixing the problem will require sacrifices from both the city and its public servants.

Proponents of the traditional defined-benefit pension that fires off regular checks to retirees rightly note that it provides the thickest safety net for the police officers and firefighters who risk their lives on the job.

That mindset’s changing in the U.S. as private-sector employers have shifted more of the responsibility of financing retirement onto workers.

Atlanta might do well to pay the bill for workers already vested in the system, as well as current retirees.

The big reforms should apply to non-vested current workers and future hires. That means a two-tier benefits system going forward.

That said, the city should also consider rolling back at least part of the formula changes that boosted pension costs in 2001 and 2005.

Atlanta shouldn’t ditch compassion in designing cost-effective new plans for workers, but we must be realistic about what’s affordable.

Retirees from dangerous jobs deserve a minimal income floor that’s buffered against volatile markets.

That means the city should continue a trimmed-down pension benefit. As an alternative, Atlanta should explore the costs of joining the Social Security system to provide that basic benefit.

Atlanta should also combine a reduced pension with a 401(k)-type defined-contribution plan fed by both city and worker contributions. That should lessen city financial exposure and give workers a greater stake in saving for their future well-being. Socking away retirement dollars each pay period is what most private-sector employees are now doing, from the working poor on up.

Relying more on 401(k)s would mean the city must work hard to inform workers about the potential risks and rewards of the investment choices they make.

Atlanta must also fix its pension funding lag. The city should explore issuing so-called pension obligation bonds to retire some of its unfunded liability. With interest rates at historic lows, Atlanta may well be able to pay down its liabilities faster and at less cost.

City workers deserve a decent retirement. City taxpayers can’t afford the current system, though. Fixing matters will require tough choices to bring pension costs in line with today’s fiscal realities. That’s the best way to guarantee future benefits.

Andre Jackson, for the Editorial Board.

Atlanta Forward: In coming weeks and months, we will look at major issues Atlanta must address in order to move forward as the economy recovers. Look for the designation “Atlanta Forward,” which will identify these discussions.