From an Op Ed by Dean Baker in the Los Angeles Times:
The vast majority of Americans who expect to retire in the next decade can count on little income other than their Social Security. This is true not only for low-income workers, who have struggled most of their lives, but also for millions of middle-income workers. ... Many if not most can expect to see sharp reductions in living standards.
The reason for such bleak retirement prospects is the disappearance of traditional defined benefit pensions and the failure of 401(k)-type plans to fill the gap. A recent analysis by the Employee Benefit Research Institute found that, in 2011, only 14% of private-sector employees participated in a defined benefit pension plan. The participation rate has been falling quite rapidly ...
Although many people were hopeful that 401(k)s would be sufficient to support a comfortable day-to-day retirement, this has proved not to be the case. In 2013, the middle fifth of households of people ages 45 to 54 had less than $60,000 in total financial assets. And most homeowners in this age group still had less than 40% equity in their homes, meaning they could look forward to paying off a mortgage well into their retirement.
In response to this situation, Illinois is developing a state-run retirement program that will make it easier and cheaper for workers to save. Many other states, including California, are studying this option. ...
Workers would have a modest amount (around 2% to 3%) deducted from each paycheck, although they could opt out if they chose. The money would then accumulate like a 401(k) during a person's working years, with the option to receive a lump sum or draw a monthly payment at retirement. ...
[P]articipation would be the default option. There is now a considerable body of research showing that workers will contribute to their retirement if they're automatically enrolled, but won't contribute otherwise. ...
[A] publicly run plan would have far lower costs than many privately run alternatives. The administrative fees for a plan in a large state such as California would almost certainly be under 0.5% of the annual holdings. By contrast, private plans can easily charge 1.5% or more. ...
Well 2 to 3 percent would be better than nothing but certainly not enough to live the life of luxury in retirement. Its a mindset problem in America where living for today seems to outweigh the concept of stashing away money for later in life. What is needed is an indoctrination to the importance of saving for retirement during high school and college. Unfortunately many figure it out through actual life experience and the realization too late in life that failure to save for retirement is a huge blunder. Some how folks muddle through but given current demographics of the country the next decade or two will be challenging for many retirees.
ReplyDeleteIn essential agreement but it's an issue larger than individuals living for today. It's endemic, from corporations where the short term dictates profit over anything, where paying for things like infrastructure falls short, where it seems any effort to take a long term view is pushed down. Chicken and egg situation but the result is people are simply doing what everyone else is doing. Pushing off the future to the future. Hard to get all worked up over what life will be like 50 years from now when no one else is. Not your company, not your government, looks like only chumps don't keep as much as they can for spending today.
ReplyDeleteBoomers reaping what they have sown! In the name of higher profit and money now attitude they destroyed the worker pension system. By making workers the cog that gets replaced the easiest, they made a work environment where nobody stays with a company for 20 or 25 years. Then they try to profit from this with the 401k where they will take the money and make a profit on the investment and the fees. Look in the mirror to find the ones to blame.
ReplyDeleteYounger workers already know SSA will not be there for retirement. We know our FRA will be 70 or higher, Medicare ages will likely go up to meet FRA as well if it survives. We know the system will not be what we were promised and we will see no return whatsoever on out taxes. Just waiting for the most entitled generation to get out of the way so we can go about the business of fixing your messes if you leave us enough to work with.
"Illinois is developing a state-run retirement program that will make it easier and cheaper for workers to save"...Really? Illinois? The most corrupt, broken and broke states in the nation starting a savings program. God help us...I live in Illinois! :(
ReplyDeleteIllinois is running a state without a budget! We slash social services to the aging, disabled and youth. If we are developing something you can certainly bet it will be designed to give the greatest profit to those running it and take advantage of the worker.
ReplyDeleteHere in Illinois we have
Closed CILs (Centers for Independent Living) for the disabled.
Closed Senior Centers
Closed Senior and Disabled transportation programs
Closed Meals on Wheels programs
Failed to match LIHEAP federal dollars placing people in peril (guess this republican believes in Global Warming and is counting on it to keep the state from freezing to death.
Reduced funding for children with Autism by more than $1 million
Closed the Illinois State Museum to the public, but keeps workers there and getting paid.
Illinois cannot even pay the Lotto winners.
If you are looking to Illinois for leadership you have bigger problems than ILLINOIS!
@9:34 am
ReplyDeleteYou are right. Buying power for Americans started declining around 40 years or so ago so that today we have only a fraction of what our grandparents used to have. Stagnating wages, inflation, and soaring healthcare costs make it so that the middle class has to spend nearly every penny they have just to stay in their middle class neighborhoods.
It's true nobody cares what happens in 50 years, but that's not the problem. The real problem is what happens in 10 years when AI starts to replace not only menial task workers but many data handling jobs as well. Millions of people out of work due to autonomous trucks and voice recognition software. There are 6 million truck drivers in the United States presently, plus many more millions of support staff to keep them going. Not all of them will be able to re-enter the workforce, and many of them will come to us. That is, of course, if attorneys and judges aren't already replaced with AI themselves by then.
In Illinois the pols, fat cats, friends and family will run the program and all collect fat lifetime pensions for very little if any work...how can anyone take this seriously!
ReplyDelete
ReplyDelete@Anon 10:15 a.m.
"Younger workers already know SSA will not be there for retirement."
I'm sure that the far right wing radicals who espouse cutting government to the bone and who do not care about the welfare of our elderly and disabled citizens want us all to believe that Social Security Retirement won't be there in the future. No surprise there. It's clever of them to persistently push that idea as if it were somehow inevitable. Those radicals use their vast wealth to push their unpopular ideas through so-called "think tanks," hired gun "experts" and of course in lobbying Congress. It's a slick campaign. Small wonder that some, including you, appear to have drunk their Kool-Aid.
Back to reality though. It is highly unlikely that Social Security will disappear or be cut. A large percentage of Americans rely on Social Security or have close family members who need it. That makes it extremely popular. Any politician who tries to arrange to take that away will be causing a lot of pain to a large majority of their constituency in a way that would be immediately obvious. Political suicide. The radicals may buy enough influence and occasionally find a politician dumb enough to try it, but it will always fail and rightly so.
@9:14, You are absolutely correct. 10:15 appears to be a troll, or possibly a hired shill, who repeatedly posts this same comment on numerous discussions about Social Security. The system will be there for millennials and succeeding generations IF the Teapots and those in Congress will address the problems early so actuarial adjustments can be made incrementally. Of course, there will be problems if the back-stabbing blowhards in Congress (apologies to author Sarah Vowell)do nothing while there is time and actually are working to kill Social Security.
ReplyDeleteI believe the reason there is no pensions anymore in workplaces, unless you work for the government is because corporations have left the worker behind and believe above all else what they call "shareholder value." A lot of corporations don't give a damn about their workers, their communities, their state or their nation. All they care about is creating shareholder value and making profits. That trumps everything else. So if Ford wants to build a plant in Mexico because the labor is cheaper and the taxes more favorable, do you really think they care about workers? No, they don't. Do they care that by moving the plant to Mexico thousands of jobs will be lost in the United States? No, they don't. The only thing they are concerned with is their idea of shareholder value.
ReplyDeleteIf you are talking strictly about retirement savings, saving 2-3% out of each check is good, but one of the reasons I think more people don't have more retirement savings is because once it goes into the 401 you can't touch it until age 59 1/2 without a big penalty. I think a better approach would be to allow people to take out as much as they want out of their retirement at certain points during their life. I am not saying the portion that was contributed by your company plan, but the portion that is your money, that came out of your check. Under the current system if you are in your twenties, you would have to wait thirty years to get your money out without incuring a big tax penalty.