In completely unsurprising but utterly terrifying news, 401(k)s are a sham:
The United States is on the verge of a retirement crisis. For the first time in living memory, it seems likely that living standards for those over the age of 65 will begin to decline as compared to those who came before them—and that’s without taking into account the possibility that Social Security benefits will be cut at some point in the future.
The culprit? That same thing Mathisen celebrated: the 401(k), along with the other instruments of do-it-yourself retirement. Not only did they not make us millionaires as self-appointed pundits like Mathisen promised, they left very many of us with very little at all.
You might be tempted to ask “what went wrong,” but a better question might be “why did we ever expect this to work at all?” It’s not, after all, like we weren’t warned. As early as 1986, only a few years after the widespread debut of the 401(k) and the idea that American workers should self-fund their own retirement accounts based on savings and stock market gains, Karen Ferguson who was then, as she is now, the head of the Pension Rights Center, warned in an op-ed published in the New York Times, “Rank-and-file workers have nothing to spare from their paychecks to put into a voluntary plan.”
The article notes that “Half of Americans have no workplace retirement accounts at all”, and I can certainly vouch for that: I haven’t put any money into my IRA in YEARS. Not because I don’t want to, but because there is nothing to spare. My current position is part-time, so there is no benefits package to which to contribute anyway.
Read the whole thing, and then consider investing in a couple of gallons of gasoline. If it’s a choice of abject poverty and cat food for dinner, self-immolation is preferable.
The two generations of elderly who had rising incomes in retirement over their parents were the “Greatest Generation” and the proportion of their parents who survived until 1950. And the proportion of the Boomers who had defined benefit pensions that increased with inflation and were not raided by their employers.
Elderly poverty has been the default setting in the American economy for most of its history.
And what would be required for that not to be the case would be for employers to get a far less proportion of their workers’ productivity than they currently do and for the total economy (through highly progressive taxes) to subsidize the income security for the lowest paid workers or the perpetually unemployed.
In fact, cat food is now unaffordable for dinner.
But farmers markets are affordable if you give up meat except for every once in awhile. And dumpster diving in the right neighborhoods apparently can produce some amazingly edible results. Or some some demonstration feasts I’ve been to have shown. The mark-down shelves in most supermarkets on any day but senior discount day are also reasonable options.
Increasingly it’s not the food but the housing costs that seniors cannot handle because unlike their parents they are still paying off a mortgage or are renting. And that includes the utility bills. Even having a minimum phone is a huge hassle for seniors these days.
Proving once and for all, that not every American is a successful ‘hedge fund manager’ – especially not when it comes to their own minimal fund, which is less like a ‘hedge,’ and more like a tiny fledgling sprout!
I was one of the people screaming about this back in the mid-80’s, when a lot of people around me were in love with Grandpa Ronnie, and his economic voodoo, and the move to eliminate pensions built-up to full-steam.
Idiots!
Not the ones in charge.
No, they were greedy and evil psychopathic geniuses!!!
But the workaday schmucks and schlubs who bought-in and invested into this ‘magic-bean’ thinking.
A lot of us had no choice but to buy into this bullshit. I have worked for an organization that offered a pension ONCE. That is IT.
I am totally going to starve in my old age. My plan really IS self-immolation.
Check out this chart of Death Rates for Suicide, 1950-2010. The senior rate is half today what it was in 1950.
Check again in 20 years..it’ll be right back up there.
Might take three or four decades for it to reach the 1950 rate. However, as we reach the limits of what medicine can do and what it can do at an affordable price to prolong life combined with our increasing dependence on high caloric and poor nutritional quality increases, expect life expectancy to decline.
The ordinary schmoe doesn’t have much to contribute to their 401k scam and if they do contribute, the (much ballyhooed) appreciation is inconsequential, certainly nowhere near enough to retire on. Take a look at the chart of, say, the Dow—at one point after two massive recessions it had “gained” exactly no ground for 20 years. Assuming that one follows the “Buy and Hold” strategy so often advocated, these “investors” got nowhere after decades. The market has lately been up for some slight gains over its past 20 years of rise/fall, but this assumes a small potatoes 401k stooge didn’t cash out of equities as the market crashed in 2008. And that a new crash isn’t just around the corner….
One might think with all this retirement income insecurity looming that nice 50+ white people might start to get a clue as to exactly which party is overwhelmingly hostile to such elderly safety nets as Social Security and Medicare. But no.
Obama was pushing to reform entitlements and taxes before he even ran for president, he also said his stance on Social Security was the same as Romney’s, that puts him to the right of Paul Fucking Ryan.
The party that nominated him is also the party who’s power centers are Chicago, NYC, SanFran, DC… the very cities of finance, real wealth, real corporate power, and a tech industry that depends on destroying and outsourcing jobs for it’s profit.
Voting for the Democrats is voting against the middle class. Claiming we are the party of social security is just as much of a lie as Rand Paul claiming the Republicans are the party of civil rights.
The Republicans are the party of the 1% and fossil fuels. The Democrats are the party of the top 10%, tech, hedge funds, and more.
Sure, the Democrats are better on social issues… provided that top 10% wants it and provided they can push the economic cost of them onto the 90% and then soap box on how progressive they are.
But if you aren’t in the top 10%, neither party is on your economic side really. However if you’re a minority, or a woman, you can vote D and have them divide up what the 90% has more in your favor. If you’re white and in the top 10% instead of the top 1% the Democrats are in your favor, but that’s it.
Sorry, but for a lot of people voting for either party is against their economic interest. The only point is taking your side in the culture war for who you want to hit in the face with a bat.
Read the whole thing, and then consider investing in a couple of gallons of gasoline. If it’s a choice of abject poverty and cat food for dinner, self-immolation is preferable.
There’s also the “invest in insane amounts of firearms, and go out in a blaze of glory”, aka “The NRA Retirement Plan”.
Lift the payroll cap. Enhance social security. Ensure everyone has at least 20k a year to live on, for starters, from SS alone.
The thing is that there is no reason to lift the cap as long as SS is running a surplus. We tried that along with increasing the rate in 1982, and all that accomplished was to generate more cash revenues that were used to fund income tax cuts and mask the true extent of the annual general revenues and expenditures disconnect (deficit).
What we want to hear is how the trillions owed to SS will be repaid through general taxation when needed.
That’s not going to happen. The banks want 401K money in their plans to get the fees, not to mention pump and dump. The Cromnibus vote tells us that Jamie Dimon rules Congress.
The answer, of course, is socialism.
Go ahead and apply that answer to pretty much any economic question.
Next.
Most 401K’s are junk loaded with high fee mutual funds and the 401K administrator takes even more fees. The participants are uneducated financially, even though they may be educated in other fields. Most are the “muppets” that Goldman-Sachs calls them. Still, they are better than nothing at all, which is the true alternative.
My advice: invest in your workplace 401K up to the limit of employer matching but no further. If your employer doesn’t match, don’t participate. Put your money into a Roth IRA instead. Invest in a broad-based fund with low fees if possible. If all the alternatives are crap (which may be) then use the money market option which is in all funds. Money markets are paying essentially zero, but you are earning the employer’s 50 or 100% matching. If you are not willing to spend a substantial amount of your free time studying (most people aren’t), hire an investment counselor who is a fiduciary. these people take a flat fee and are legally obligated to act in your best interests. Various stockbrokers, insurance companies and annuity salesmen are not.
You’re on your own, just like your ancestors. Stand up and be Men. Hint, that means be ruthless and cruel and unbending. You are in a concrete jungle.
Pensions are gone. Even the government pensions are dying. The corporatist Democrat/Wall street republican alliance is working to destroy Social Security. Look at the massive ERISA cut to existing pensions that was in the CR(ap)omnibus bill along with letting the banksters gamble with your insured bank deposits. Don’t count on Obama, he urged passage of that POS.
Are you on the old system or new one?
I’m on the hybrid – CSRS offset
By any metric you care to examine, ever since the late 1970s, American labor has been working more hours more efficiently for more than 35 years while wages have remained stagnant that entire time. All the Wealth created by that Labor has gone somewhere, but where? It’s certainly not into the pockets of the people who have created it.
Another game of three card monte? You’ll find that red queen this time, for sure!