Add one more difference to the lifestyles of Americans versus Europeans, brought to you by our qwnership society. In Europe people retire at 65 thanks to decent pensions. In the America of the 21st Century, where we privatized retirement savings, they just keep on working, because when the market crashed, all their retirement nest eggs got broken:
In other parts of the developed world, people are retiring as planned, because of relatively flush state and corporate pensions that await them. But here in the United States, financial security in old age rests increasingly on private savings, which have taken a beating in the last year. Prospective retirees are clinging to their jobs despite some cherished life plans.
As a result, companies are not only reluctant to create new jobs, but have fewer job openings to fill from attrition. For the 14 million Americans looking for work — a number expected to rise in Friday’s jobs report for August — this lack of turnover has made a tough job market even tougher. […]
The diverted life plans [people in their 60’s] are an unintended economic consequence of the nation’s sprawling 401(k) plans. These private retirement savings vehicles, designed 30 years ago as a supplement to traditional corporate pensions, have somewhat haphazardly replaced the old system, like an innocuous weed that somehow overgrew the garden.
As is apparent in this downturn, the economic effects of such an ad hoc system can be perverse. In boom times, when companies need more workers, the most experienced employees may decide to retire, taking comfort in their bloated 401(k)s, whose values typically fluctuate with the financial markets.
Today, the reverse is happening in the first deep recession since the new accounts became so pervasive. A Pew Research survey scheduled for Thursday release found that nearly four in 10 workers over age 62 say they have delayed their retirement because of the recession.
So, to sum up, our society makes you work harder, longer and pay more for health care, and then when it comes time to retire, if the market is down so are the savings you need to live on in your golden years. Which means you keep working at your old job, or you are forced to look for a new one. But hey, greatest country on earth right? Unless your a young person looking for a job, or an old one trying to hang on to one well into your 70’s. As the Times’ report makes clear, our system of privatized retirement savings creates perverse incentives, and actually acts as an economic destabilizer. In good times your best employees leave early, and in bad times they crowd out younger workers desperate for a new job to begin paying off their crushing debt load from financing their education:
New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama’s proposed 2010 budget. […]
The new numbers highlight how debt has become commonplace in paying for higher education. Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate, according to an analysis of the government’s National Postsecondary Student Aid Study, conducted by financial-aid expert Mark Kantrowitz. Only a dozen years earlier, according to the study, 58% of students borrowed to pay for college, and the average amount borrowed was $13,172.
Great news if you are in the business of lending money to parents and their students to finance college costs. Bad news if you want graduates to use the money they make from their first real jobs to help the economy grow. Needless to say, those socialistic Euros typically treat their college student debtors far more leniently than we do ours. We start gouging our kids from day one with higher tuition costs and demands for loan repayment ASAP regardless of whether someone actually has a job that can service the debt.But that’s our system right now. Dog eat dog, and may the best (and worst) senior executives and Wall Street Bankers retire early in luxury thanks to their golden parachutes and super-sized bonuses, while the rest of us work ever harder, die earlier and suffer more so that they can live the good life. Does that sound like a fair system to you? (Rhetorical question, people).
In France only 4% of people ages 65-69 are still working. In the land of freedom, its one third of all people in that age group. And a recent PEW study found that nearly 4 in 10 American workers age 62 or older have delayed their decision to retire (all per the NY Times article I initially linked). That’s an amazing statistic. It tells me that we have something seriously wrong with the way our economy is structured. And I’m not the only one:
The recent retirement losses have prompted policy makers to discuss whether Americans need a stronger social safety net, not just in health care and unemployment benefits, but in retirement as well.
Economists say there are advantages to reducing the financial risk for individuals. Pooling investments, in some cases, allows workers to switch jobs more easily and helps lower fees associated with investment decisions, for example.
Hey, maybe we need more socialism, not less, people. Look at this:
… Europe isn’t just the land of “socialized” medicine. It is also the land of “socialized” retirement plans, and like other automatic stabilizers, pensions help cushion the blow of an economic crisis.
Retirement income typically comes from a combination of three buckets: state pensions, corporate pensions and individual arrangements. In many other industrialized countries, that first bucket — state pensions — supports a large amount of retirees’ income.
The typical American receives just 45 percent of his preretirement wage through Social Security, according to the Organization of Economic Cooperation and Development. By contrast, a worker in Denmark, which has one of the most comprehensive and generous retirement arrangements in the world, can retire with a state pension that is 91 percent of his salary.
Old people with money retire, making way for new workers. They also have more to spend in retirement, helping to keep their economies more stable, more resilient. More able to weather a downturn in the economic climate brought on by (ahem) greedy and stupid American Wall Street Investment Bankers and the bubbles they created in tech stocks, real estate and the derivatives market.
I know, it all makes too much sense. Cheaper health care costs. More money for retirees. A chamce for young people to better afford college and get on their feet. A more stable economy. Well, it makes sense for anyone who isn’t in the top 1% of the income brackets her in the US of A. Which is why we so much opposition to the evils of “socialism.” You know, right now, I would trade some of that evil for our current “righteous ultra individualistic unfettered capitalism ” where the next serious illness or family crisis or job loss could wipe out what little savings you and I have and send us directly to bankruptcy, do not pass go, do not collect a single red dime. Those evil socialists in “Old Europe” keep looking better and better.
