It’s interesting to see Duncan Black take to pages of USA Today to try to change the paradigm about Social Security. He argues that we must increase Social Security benefits. Needless to say, no one in Washington DC is making that argument. As for 401(k)’s being a disaster, I have long felt that way, too. But it’s not just that people do not (and often cannot) sock enough income away in their accounts, it’s that it has led a generation of people to believe that they have skin in the game on Wall Street. People want the stock market to go up so they can get a nice quarterly report. But that’s like a bunch of guppies taking an interest in the shark tank. Unless you have a ton of money, you are not a player, and you have no business watching CNBC as if you were.
You should be focused on employee rights, not the Nasdaq.
Yep. The 401(k) setup made us workers accessories to our own exploitation. Corporate management has a fiduciary responsibility to us 401(k) stockholders to screw us.
And what you aren’t told is that 401(k)’s are also another grifter scheme of Wall Street. A properly run, and funded, pension plan is cheaper(meaning expenses and such) and better for workers. Companies and Wall Street would never tell you that, though.
But during the noughts, the opening line in your annual 401(k) presentation by the “vendor” was that Social Security was going away. I got so infuriated in 2007 with this bullcrap that I walked out of the presentation and had a heart-to-heart with the VP of personnel for the company I was working for. But that did not stop the next year’s presentation starting the same way — with a different vendor. The industry must have used the same script.
I had the same experience a few years ago at work when the “vendor” was doing their presentation. Except it was a web conference and he was in another city. So all I could do was sit there and slowly steam. It’s all now part of their standard pitch.
But isn’t it? I feel much safer with my IRA money, primarily in a solid balanced mutual fund that only lost 9.8% in 2008 (VWINX) then made it back plus more in 2009, and solid blue-chip dividend payers than I do in Social security. Even Democrats want to cut Social Security by stretching out retirement age, chained CPI, and worst of all, “means testing.” Since the Postal Service started borrowing from the TSP ( government 401K) I don’t trust that either. However, I agree with you that it isn’t for everyone. It takes financial and mathematical education and a lot of time to manage investments. And the industry does try to rip you off with funds of funds (fees on top of fees) and touting whatever gives the most commission regardless of worth.
USA Today! Go, Duncan, Go.
It is exactly the right policy to lower the deficit. No that is not snark. Do the analysis.
As one of those people who has spent the last 30 years dumping money into his 401K, after all those grandiose promises of “controlling your own retirement”, I am at the same point as if I had stuffed dollar bills into a mattress. I remember so well all those rosy financial tables with projections showing all those great 8, 10 & 12% returns and how well off you were going to be if you just stuck it out. It’s certainly better to save than to not. But what a crock of shit it has turned put to be.
I hear you – I spent 8 years throwing money into a 401k. I quit that job in 2008, so stopped contributing to it and then moved it into a traditional IRA, and it still hasn’t reattained the ‘value’ it had in 2008.
In fairness, employer contributions paid a role in building it in the first place, so I am probably slightly ahead of where I would be had I just stuffed money into a mattress. You know, for now.
Yeah, we have also been investing outside 401K’s since 2000. That is barely back into the black after the post 9-11 plunge and Bush’s and the Banker’s Great Recession.
We are certainly better off than a lot of people with their retirement savings; simply because we have been saving. We haven’t made anything on it, really. But we have put some back. I know a lot people my age, though, who have virtually nothing spirited away. And with some of them, it wasn’t that they couldn’t afford to save something. They chose not to, and spent every dime they made. A lot of it unwisely. Most though, simply cannot afford to put away what is necessary to avoid either working until they die, or eating cat food in their old age. Hey, we’re finally getting that ownership society that the GOP has crowed about for so long. Eric Cantor was just opining on it this week at his GOP 2.0 reboot.
But don’t people deserve what they get if they spent their income on oversized homes, vacations, jet skis, and flat screen TVs?
And for those smart enough to save shouldn’t they have right to invest as they please and not subsidize the “takers”?
At least that is what the Right will say.
What they don’t get is that at this point it is really besides the point.
Or that if people had less fear they would be free to take risks, and spend the money that raises all boats in the economy.
We need Social Security AND IRA’s/401K’s. SS for basic needs, the other for luxuries and legacies. Sorry about Company pensions. I saw too many evaporate in the 1970’s to have much enthusiasm for them.
I’m for totally disconnecting benefits for employers. Too much job mobility and irresponsible employers. Even government employees are being screwed out of defined benefit pensions, either through premature layoffs or legislative action.
Coburn and Burr tried to eliminate the defined portion in 2011:
http://www.federaltimes.com/article/20110322/BENEFITS02/103220302/Bill-seeks-end-FERS-pension-new-hi
res-beginning-2013
The better to accommodate the revolving door.
And Chained CPI. That was going to be applied to all military and civilian government pensions as well as SS.
And another bubble is broken…..CURSE YOU BOOMAN!! (ala snoopy vs. the Red Baron)
Apparently Ralph Nader, joined by a Conservative named ‘Unz’ is making the argument that we should raise the minimum wage to $10 an hour; quickly upped by the Conservative Unz to $12 an hour. Similar argument as Duncan and a good way to broaden the whole discussion of middle class sustainability.
I recommend $20. And include restaurant and agricultural workers.
By my calculations, $20 is the equivalent of the purchasing power of the minimum wage during the late 1960s, even if the CPI math doesn’t come to that exactly.
Funny you should say that, $20 was my response as well. $10 is just salt in the wound.
Has everyone seen this
Wow. Bravo, Duncan.
This editorial is like the Inchon landings. He’s opened up a whole new front.
USA Today commenters are bad, and they’re still not as bad as Yahoo. Look at all of the “my 401(k) is doing great! It’s not my fault these people are dumb.”
Sick, sick.
Freddie and Conor had a good Bloggingheads that discussed some of this stuff here, which Freddie discusses here:
Link
So the paid commenters are going wild?
Wall St. lickspittles.
Increase them and go back to requiring that people really be retired not just over 66 or 67. We need these people (myself included) to get out of the work force and make way for younger people. We need to cut work hours as well to spread the available jobs.
It seems contradictory for all of us to applaud Atrios’ argument and also to defend Obama’s willingness to accept chained CPI.
When Booman a few months ago challenged Obama’s critics to say what they’d be willing to compromise to get a bill that could be passed. I wrote that I’d be willing to compromise not raising Social Security benefits by as much as they should be raised. Let’s just say that it wasn’t hailed as a paradigm shift.
But Atrios’ piece and the response it’s getting here shows how much effect one person with authority can have. He doesn’t care that noone in Washington is making his argument, because if he keeps up what he’s doing, more will be. In my book, supporting the President means encouraging this kind of behavior, not defending the status quo.
Duncan is spot on. Sadly, I remember reading some of EBRI’s papers on 401(k)s way back in the late 1980s that focused on potential impacts of moving from defined benefit to defined contribution retirement plans. This was the death knell for pensions and the glidepath to today’s looming crisis for boomers. While the Great Recession was the trigger, the proverbial chickens have come home to roost (rest?)from poor policy choices made decades ago. This isn’t about individuals just not saving enough – can we stop blaming the victim here? Yes, boost Social Security payments; yes, lower the eligibility age; yes, eliminate the cap. And while we’re at it, open Medicare to all at any age!