Huffington Post: America's retirement crises

Laura Basset lbassett@huffingtonpost.com | HuffPost Reporting

Boston College's Center for Retirement Research says the US is in a retirement crisis.

"The key sources of income retirees are relying on are either under attack, in the case of Social Security, or disappearing, in the case of traditional pensions," said Ross Eisenbrey, vice president of the Economic Policy Institute, at a press conference on Wednesday.

The early Boomers are better off than the late Boomers, and God help the poor Gen Xers. Seventy percent of them are on a track that leads to a fallen standard of living in retirement.

According to the latest retirement income data, half of 65-and-older households have an annual income of less than $29,744 .

Traditional pensions are disappearing in favor of 401(k) plans, which allow employers to shift much of the cost and all of the risk to their employees. 

Congress is considering cutting Social Security to balance the federal budget.

Maria Freese, director of government relations for the National Committee to Preserve Social Security and Medicare, said . . . that the (retirement) crisis could become far worse if Social Security is compromised.

"There's an old saying that goes, 'When you're trying to get out of a hole, the first thing you have to do is stop digging.'

The last thing you want to do is to buy a bigger shovel, and that is unfortunately what we see happening with many policy makers here today in Washington," Freese said.

 Instead of exploring ways to strengthen Social Security and improve our private pension system, the only discussion we hear these days are the various ways Congress could cut Social Security, and presumably they're hoping nobody notices.

Rightardia has pointed out the 401K plans were designed to be employee savings plans, not a pension plans. Only 21 per cent of Americans have pensions when they retire and many of those are government pensions. 


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The Good Ol' Days or the best of times

The best of times

Yes, I remember them well being a Baby Boomer.  After World War 2 there was a tremendous building boom in the US because returning vets used their VA benefits to buy homes. My parents brought their first home in a Huber Community in southern Ohio that sprawled for four or five square miles.

Many also used their veteran's benefits to go to college. College enrollment also boomed.

During this era the Income Tax rate on the most affluent Americans was 90 per cent. FDR used income Tax and the Estate tax to pay for the war and help returning vets restart their lives. At this time only one in 30 Americans was considered wealthy.

Neighborhood schools were embraced by parents and it was considered patriotic to support tax changes to increase schools millages.  I can never  recall a tax amendment that benefited the school system that was defeated.

At that time the power company, the water utility and trash pickup were public and were very low cost.

If you worked for a fair to meddling corporation, you could look forward to a company pension and medical care when you retired. It was the best of times.

The worst of times 

Americans have been sometimes called sheeple because they really are unaware of how much things have really changed.

At this time there is a building collapse that  was caused by decades of Republican deregulation and the Bush Ownership Society. The repeal of the Glass-Steagal Act (1933) and an SEC rule change in 2004 that allowed banks to reduce reserves were the two main culprits.

Colleges are under assault by conservatives for being liberal and many neighborhood schools are being closed due tax shortfalls. Teachers are also being laid off. In Florida there is a supreme irony: Republicans wanted bonuses for the best teachers. These teachers, who make more than the average teachers, are the ones who are being laid off.

Many of these tax problems cause by over zealous Republicans who made tax cuts that would not fully fund government activities. The deficit doubled under the Bush presidency. Bush used the Republican Trojan horse, Supply Side economics. to cut taxes for the most affluent Americans and he was also the only president stated a a war without raising taxes.

After eight years the US deficit was doubled. Bush also suspended the Estate Tax. The income tax rate for top earning Americans in 2009 is now 35 per cent. That is a 55 per cent drop since the Eisenhower era. But wait there's more: Bush dropped the capital gains tax to 15 per cent. Millionaires and billionaires make most of their money with capital gains so the most fortunate Americans actually have a lower tax rate than the average American.

The income tax rate for top earning Americans in 2009 is now 35 per cent. That is a 55 per cent drop since the Eisenhower era. But wait there's more: Bush dropped the capital gains tax to 15 per cent. Millionaires and billionaires make most of their money with capital gains so the most fortunate Americans actually have a lower tax rate than the average American.

Most of the utilities have been privatized and some of these power companies request rate hikes whenever oil prices rise. Oddly, the don't request rates drops when the price of crude drops.

Very few Americans get private pensions anymore because corporations cast them out before they hit retirement age. The Supreme Court has stated that corporations do not have to provide private medical care once a retiree is eligible for Medicare.

The Individual Retirement Account (IRA) is also an interesting phenomena. Congress established the IRAs as a savings program not as a retirement program. Many corporations now only offer the IRA as their 'pension program.' Many corporate IRAs have hidden fees that the IRA fund manger doesn't have to disclose.  Many Americans who became unemployed recently discovered their IRAs had been looted by Mini-Madoffs.

If a corporation doesn't offer matching funds or other financial incentives, their IRA program is valueless.You may be better off settitng up an IRA with a bank.

There you have it. Since the New Deal, many American have lost their homes, the neighborhood school has been weakened or closed, college costs have accelerated,  your utilities now take a bigger bite from you paycheck because of privatization, and most Americans will never see a corporate pension or corporate medical benefits.  Still confused about public health?

This is the legacy of the Republican party and some conservative Democrats who should have known better.

It is the worst of times!

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