Chipping Away at Retirement Security
In The Great Risk Shift, Jacob Hacker lays out the deterioration of retirement benefits:
Twenty-five years ago, 83 percent of medium and large firms offered traditional “defined-benefit” pensions that provided a predetermined monthly benefit for the remainder of a worker’s life. Today, the share is below a third….Between 1989 and 1998 – a decade in which 401(k) coverage exploded and the stock market boomed – the share of families whose pension savings allowed them to replace at least half of their prior income in retirement actually declined, as old-style guaranteed pensions rapidly became a thing of the past….
Now, 401(k)’s are being chipped away.
About a quarter of companies have either suspended their 401(k) plan match or are considering doing so because of the economic downturn, according to a recent survey by CFO Research Services and Charles Schwab. The list of companies that have suspended matches includes Hewlett-Packard, Sears Holdings, Starbucks and Eastman Kodak.
“Nearly half” of “large companies” that have diminished their workers’ retirement security by reducing or suspending 401(k) contributions say they’ll return them within a year. “Only” 5% say they won’t return 401(k) matching at all. And some companies that do reinstate matching contributions will change them.
So…large companies? Defined how, and accounting for what percentage of workers affected? Is it “only” 5% if you’re one of the workers to see your chance at a comfortable retirement diminished? And we can totally rely on the companies that change how they contribute to 401(k)’s to change it in ways that benefit their workers, right?
Oh, yeah. Another thing. What’s going to happen to the retirement funds of these companies’ CEOs?
Hacker’s “great risk shift” argument remains a crucial one for understanding what’s happening to workers in this country. Bit by bit, the building blocks of the middle class have been chipped away. In good times, workers are told they don’t need defined benefit pensions because their 401(k) will give them ownership in a stock market that will rise forever. In recessions, they’re told that they can’t have employer matching in their 401(k) because, well, they just can’t. And after the recession, eh, we’ll see what they get back.
And Hacker’s fundamental principle is a powerful moral argument:
If you work hard and do right by your families, you shouldn’t live in constant fear of economic loss.
That’s why we fight.
Tags: Retirement
Quite coincidentally, I wrote about this for tomorrow’s blog entry:
What should have happened
I read in The New York Times today that now, even “good guys” (their term) like the AARP is cutting their 401(k)’s, in an effort to cut costs.
This drives me crazy.
Years ago, there used to be pensions because, as we all know, people age and need something to retire on in their later, aged years.
Pretty complicated huh? (read sarcasm)
It was only fair and intelligent, for pity’s sake.
We work at jobs for decades and, in return, it just made sense that responsible companies would put a bit of money aside–yes, from profits–for each employee so two things would develop.
First, the good employee would be rewarded for good work and encouraged to stay with the company. (We used to reward lonevity at firms).
Secondly, at the end of those decades of work, the associate would have money to take care of them in their old age.
But that was thousands of years ago, it seems.
Companies decided long ago that those pesky, “expensive” pensions were costs that had to be cut so they were, bit by bit, done away with.
That was bad enough.
At the time, the Federal Government should have stepped in, I believe, and required companies to maintain the pensions. It was good, too, for the country, so people had these saved nest eggs and could live on them in later life.
But naturally not.
Fortunately, someone came up with a 2nd-best idea and that was to start these 401(k)’s. The companies would get a tax deduction and the employee could contribute to them and voila’! While not as good for the employee as the pension, since half of it was usually paid for by the employee, at least there would be, again, something for that same employee to retire on.
But again, the ugly, voracious, self-eating “free market” and capitalism comes along, sees a pot of money, one that it also views as an “unnecessary cost” and does away with it.
So now, in 2009 America, the worker–the old “salt of the Earth” we used to celebrate–is totally and completely, with the exception of the pittance of Social Security, alone and on his/her own.
If you are one of the lucky few who have been able to keep a job, through good times and bad, and also been prescient and disciplined enough and able to save all your working career, you’re okay.
Maybe.
Probably.
Possibly
If you stay lucky.
If, on the other hand, you’ve ever been let go from a job or had some expensive health care or other problem or just plainly weren’t lucky and thrifty and extremely disciplined, all–you’re screwed.
Too many Americans, frankly, down through the decades, have fallen into this last group, especially given the current financial crisis striking the US.
And that’s why the US Federal Government should have held up expectations of its corporations, so we could further strengthed in the entire society, for the long term,
Instead, all that corporate money just fattens the wallets of a select few lucky, conniving, shrewd, manipulative corporate titans who end up with hundreds of millions and even billions of dollars, while the middle class shrinks and people start doing without important basics like health care, insurance, food, in some cases, and more.
I’m sure some free market capitalist, Republican, conservative, right-winger would defend this barbaric, unbalanced, unfair, inadequate and, really, broken system.
I sure can’t.
Link to story: http://www.nytimes.com/2009/06/27/your-money/401ks-and-similar-plans/27money.html?_r=1&scp=1&sq=Et+tu%2C+AARP%3F&st=nyt
Mo Rage
http://www.moravings.blogspot.com
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Coincidentally, I wrote about this for today’s blog entry. See it here: http://www.moraving.blogspot.com
Mo Rage
First we did away with pensions. Now we’re doing away with the 401(k).
Why don’t they just strap us to machines and bring us gruel 3 times a day?
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