June 23, 2016
enough that “entitlements” for the elderly are bankrupting
the country. Do they have to inadequately preserve seniors’ quality of
nation ages -- more
than 14 percent of the population is over 65, and the elderly will outnumber
those younger than 18 by 2033 -- more voices are warning about an impending
crisis of retirees with dangerously weak financial resources. The Bipartisan Policy
Center (BPC) has weighed in on the matter, with a new report by its
Commission on Retirement Security and Personal Savings, “Securing Our
legitimate cause for concern, the BPC wrote, because multiple “measures
indicate that a large proportion of American workers will experience a lower
standard of living in retirement. Some older individuals who might face
financial hardship have been poor throughout their working lives, but many who
have been solidly middle class are similarly unprepared.”
theory, retirees are supposed to pay their bills with the “three-legged stool”
of Social Security, a work-related pension, and personal savings. Social
Security replaces just over 40 percent of retirees’ wages/salaries. A defined-benefit
or defined-contribution pension kicks in some more. And an decent number of
bucks squirreled away, drawing interest over the years, completes the troika.
BPC noted, currently, fewer than half of private-sector workers participate in
an employer-sponsored pension plan. Just over a third don’t have the option,
and 17 percent have access, but chose not to participate. “As a result, for too
many workers, the pension leg of the retirement security stool is either too
short or simply does not exist.”
tempting it is to slam businesses that don’t offer their workers a pension, the
center makes the sensible argument that “retirement plans are complicated and
burdensome to administer.” Regulations and costs aren’t trivial. “An employer
must select from a variety of plan designs; document the plan; hire a trustee;
establish a recordkeeping system; and accept a degree of fiduciary
responsibility, which means the employer must act prudently and in the sole
interest of participants. In addition, employers are responsible for
negotiating and controlling the fees associated with their employees’
a weak economy, and confronted with a relentless assault of federal
micromanagement (Exhibit A: Obamacare),
it’s little wonder why so many businesses eschew pensions in their compensation
packages. But for many workers -- particularly those with modest incomes --
even when a pension is offered, it makes sense to opt out. The Government
Accountability Office recently
explained that the “fairness” of both Social Security and the tax code play
roles: “[T]he U.S. income tax rate increases as a household’s taxable income
rises, so the tax advantages of contributing to a [defined-contribution] plan
-- increased tax savings -- are greater for high-income than low-income
households. The progressive structure of Social Security benefits also reduces
the incentive … to participate … . For instance, Social Security replaces a
higher percentage of earnings for low-earners than high-earners, which may make
… participation seem less urgent for low-income households.”
who plan to work ‘til the day they drop -- to them, retirement sounds boring as
hell -- are a rare breed. In recent decades, despite much longer lives,
Americans have been retiring younger.
And “early claimers” of Social Security, now a staggering three-quarters of the
whole, are voluntarily reducing their monthly checks by a sizable amount.
worse, the BPC’s figures on the “increasing indebtedness among older Americans”
expose “a unique threat to retirement security.” While 38 percent of households
headed by a senior citizen had red ink in 1989, the share is 55 percent today.
where’s the money going to come from, to clothe and house and feed and
transport and entertain America’s expanding army of oldsters? D.C.? Please.
With no revenue boosts and/or means testing, Social Security will need to
impose benefit cuts starting in 2034. Can state and local governments step up?
Uh, no. They’re drowning
in unfunded liabilities of their own -- primarily driven by ludicrously
generous retirement payouts for “public” employees.
long shot, but maybe we’ll learn, once again, to take care of each other. Kids,
grandkids, and great-grandkids will sacrifice considerable amounts of their own
time and money, giving back to the people who gave so much to them. Instead of
living, perhaps the arrangement will again become the norm. In time, we
might reach a level of maturity that recognizes the inability of government’s
magic money tree to solve the challenges of a rapidly graying society.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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