Work Until You're Dead? That May Be the Only Option for Many Americans

Work Until You're Dead? That May Be the Only Option for Many Americans

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Political Letters -

2010.12.23.XYZ

Jane WhitePresident of Retirement Solutions, LLC.

Posted: September 6, 2010 09:00 AM

Work Until You're Dead? That May Be the Only Option for Many Americans

Many Americans are likely to have to work until they are dead, not as a result of Social Security shortfalls but because of their inadequate 401(k) savings or the fact that they have no retirement plan at all. This disaster has not dawned on the mutual fund companies that manage retirement assets, much less been debated on Capitol Hill. Given that the first wave of Boomers is scheduled to turn 65 in 2011, attention must be paid.

Here's the raw deal in a nutshell: Unless you've got Chief and Executive in your job title -- including "Ousted Disgraced CEO" -- you are probably pension-poor, even if you earn a six-figure salary. That's because only 11% of the private sector population is covered by a regular pension. Unlike during the postwar Fabulous Fifties and the Soaring Sixties when America was a "fortress economy" and almost half of the private sector was covered, currently even most employees of big companies can't count on one. Only 17 of the Fortune 100 companies offer a traditional pension to new hires.

The 401(k) plan that has replaced pensions was meant to be the icing on a pension cake when it was created 30 years ago, not a substitute for a pension. While 401(k) plans have been criticized as risky, the more important failing is the typical stingy employer "matching contribution" equaling 3% of pay, the second lowest in the world. (There are some exceptions, universities typically contribute the equivalent of between 7 to 10% of pay.)

The rarely discussed rule of thumb for nest egg adequacy is that you need the equivalent of 10 times your "final pay," or your salary near retirement, in your 401(k) AND rollover accounts. Unfortunately, most people will be lucky if they have a little more than "one time their final pay." According to the Employee Benefit Research Institute, the median amount workers in that age group have saved is a mere $77,000 and the median salary for that age group is $61,000. What's even worse is that 50% of the private sector population isn't covered by any plan at all -- pension OR 401(k).

While I have a feeling that President Obama would support genuine 401(k) reform if he knew what a pension pickle we're in, his so-called 401(k) experts simply support "automatic enrollment," in which employees with a 401(k) plan contribute 3% of their pay -- one third of what is needed -- without requiring a minimum employer contribution. In addition, these adherents of Rubinomics also endorse "automatically annuitization" of 401(k) account balances at retirement, ensuring lifetime employment for annuity salesmen but insufficient income for annuity owners. As for the 50% of the Americans with no plan at all? They get an "automatic IRA," in which employees can contribute but employers don't have to. Automatic inadequacy! Thanks, guys!

At least the UK's leadership is planning a fix to that country's private pension system -- because they don't equate employer mandates with Godless Communism -- even though a greater percentage of their population is covered by a plan and their 401(k)-style plans feature employer contributions that are twice as generous as that in the U.S.

Starting in 2012 virtually every UK employer that doesn't currently offer a pension must enroll employees in a 401(k) style plan that features a minimum employer contribution of 3% of pay and 3% from the employee (smaller employers are phased in). Oh -- and the government's plan is for the account assets to be pooled, professionally managed and feature fees that are no more than .3% of account assets -- about a third of what 401(k) participants pay on funds in their accounts.

It's a disgrace that the most advanced country in the civilized world not only has the worst retirement system in the civilized world but leadership that can't be bothered to fix it. But don't just get mad, tell your elected officials to take action. I've proposed legislation that would require most employers to contribute the equivalent of 9% of pay -- the same rate that Australian employers are required to shell out. Here is the link to the page on my company's website that describes it. It contains a description of the bill, along with the names if the members of Congress who have oversights over pensions that your Congressperson needs to be in touch with.

Readers' Comments

Roy Merritt old car guy 4 hours ago (1:49 PM)
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Do you remember the Movie Soylent Green? Edward Robinson was led away to a room where he watched peacful scenes of country sides while poison took away his life. His body was transported to the factory and he was made into the tasty Soylent Green. Perhaps the CEOs of Chase and Goldman Sachs had that movie in mind when they decided to do away with the bottom half of society.
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InfoWarriorX20 4 hours ago (2:16 PM)
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Agree totally. In fact I just bought the DVD of "Soylent Green" to view it again last week. I thought Robinson was better than Heston in the flick; and I enjoyed the DVD extra where MGM celebrated this being Robinson's 101st film. In any event, this is the future that the superclass envisions. Remember how last year David Rockefeller convened a meeting with Oprah, Ted Turner, the Virgin Records owner Richard Branson, Warren Buffet, and Bill Gates among others to discuss, as was leaked later, how "God-like" decisions on their part need to be made to reduce human population? Check out Obama's science advisor John P. Holdren's 1000+ page book "Ecoscience" where he spells out the need to reduce the population by 80% via state compelled sterilization, harmful stuff put into vaccines and the water, and control of the world's food supply (have you heard of the company, Monsanto?).

Brave New World and 1984 weren't written by people with good imagination. They were written by defectors from the system who had read the eugenics societies' documents. These sociopaths think that their dominating humanity (and culling our numbers) through fraud and deception is evidence of their superiority via an amoral reading of Darwin's theory of survival of the fittest.

Things will go from bad to worse if we don't take our government back.

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MikeDu

Before we stress too strongly Americans' congenital inability to plan ahead let us recall first that the bulk of the population hasn't had a 'raise' above inflation in 35 years. Let us also recall the great Wallstreet crash of 2008 stole roughly 30% of our life savings. Also, several vital and unavoidable sections of the economy have skyrocketed in price far far past the nominal inflation rate. To put it simply: Its not our fault. The American economy has been a rudderless ship for decades, purposefully sabotaged by Ayan Rand economic groupies with their insane 'hands-off' dogma. I'm surprised they don't recommend building autos without steering wheels.

hardcenter 4 hours ago
Right on! If the stock market had gone up over the past decade at an average of even a few percent a year, I know how much better off my 401K would be much less how much better the nation as a whole would be.

InfoWarriorX20

Ayn Rand and free trade had nothing to do with it. It was our elected leaders and so-called watchdog agencies paid to look the other way; it was legislation written by select corporations that gave the insiders distinct advantages over their competition. It is the fascism that John D. Rockefeller (aka "competition is a sin") and members of the uber class support. There is nothing "free" market about what has gone down in the US since 1913.

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InfoWarriorX20

Also, there is a problem with raising the retirement age to 70. That might be okay for an air conditioned desk job; but for a lot of people -- take truck drivers and the people who stock shelves for Trader Joe's and WalMart (ie, manual labor) -- forcing these people to work well beyond their physical capacity to do so is not just penny pinching, but cruel. Not that GMO foods or the other poisons forced upon us are helping anyone retain their vitality past 40 years of age. A related issue is that Congress, who passes all these laws, is exempt from the healthcare and retirement systems that are provided to the people who elected them. That is the bus-sized loophole that makes much of this hypocrisy possible. Oh, and the issue that corporate criminals like Goldman Sachs aren't tried criminally for fraud -- never an admission of wrongdoing, and all the statutes let our corporate overlords self-police -- doesn't help matters.

InfoWarriorX20

You are not going to be able to "mandate" higher contribution costs to employers without fixing the problem of unfair trade advantages given to corporations and manufacturers operating outside the US. Tariffs worked fine the first 100+ years of our country. There is nothing "free" about trade governed by NAFTA and the WTO. It's slavery and neofeudalism that they're after. If nothing changes, the "sucking sound" will grow stronger, and we'll be jumping to our deaths like Chinese iPhone workers do. cf:

http://theeconomi ccollapseb log.com/archives/10-reasons-why-conservatives-should-be-against-unfair-trade-with-china-and-10-reasons-why-liberals-should-be-against-unfair-trade-with-china

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