Even then, 401ks are tied to the stock market, and are subject to the whims of the market as such. Back to my example of my friend’s parents - they were okay, and all their colleagues who switched in the 90s got their savings wiped out TWICE before they retired. These are people who are tenure track profs, who were not moving around for work.
Not anymore, we don’t. A large number of people are screwed now, because they went from a pension to a less stable market based savings - which they are expected to understand all these complex differences. They have to be an expert in order to make it work for them. If they aren’t they get screwed. Guess what? Most of us aren’t financial experts… it’s system meant to move money from the pockets of workers to the pockets of corporations.
Only it’s a thing of the past, and it does go away, and for reasons you can’t control.
I’ve had too many family members have it happen.
You work at the same employer your whole working life and then the rug slips out from under you. And it’s not just corporate greed (although that can be a factor, of course). Sometimes things change so drastically that even the rocket surgeons don’t predict it.
However, the government can be less susceptible to pulling the rug out than the private sector. Some might think that’s naive but the government is something we can control. In theory.
This, I strongly agree with. The trick is getting more people to understand that and actively participate in that. Not the endless partisan posturing we’ve seen since the 90s, more strongly on the republican side. The fact is that during the era of the liberal consensus we made major, important changes through government that radically improved people’s lives. The post-Nixonian “age of fracture” as Daniel Rodgers called it has done little except subject more people to harsher conditions that has done things such as shorten American lifespans.
maybe it’s time to rethink our antipathy towards government and seek ways to make it more transparent, accountable, and in OUR service. Maybe we need to understand that we can all be part of a government in a way we can’t really be part of a corporation (unless we’re CEOs and board members). Maybe we need to understand that a for-profit corporation has goals that are very different from the goals of a good government, and that putting a CEO in charge of a government is deeply problematic, because he doesn’t understand that the goal is not to line the pockets of the President-EO and his “board-cabinet”, but to provide services to the American people…
Also can we please eliminate the wage limit ($132,900 for 2019) on what is taxed for social security (FICA) as a quick fix to some of that. Just let it go all the way up. Because the tax stops it is regressive and it doesn’t tax exactly those people who are less likely to be dependent on social security as their primary retirement income, when the time comes. (I will say that I hadn’t realized the healthy increase to the limit in 2017. Data here.)
You make a very good point. It is certainly easier (and cheaper) to invest without concern for the amoral nature of the corporations that use your money, but it is possible to invest in corporations that (at least try to) reflect a healthy skepticism for unfettered capitalism. It’s just more difficult to do.
FWIW, the real estate sales industry does not have a history of especially moral behavior either.
I would much rather have a 401k than a pension. I’ll take money now (in the form of a company match), rather than the promise of money at some nebulous point in the future. There are many examples of pensions being taken away, after people have retired. Just wait until GE cuts their pension.
Particularly because anyone who entered the labor market post 90’s has likely had no access to a formalized pension system of any kind. Private pensions are a thing of the past. In their place is the 401k. With younger Americans switching jobs so often, there’s little chance there were consistent contributions over time. Or that they even paid into that to begin with.
Public sector pensions aren’t what they used to be. There’s typically a hard line between the good pension, and the new pension. My father gets a far better pension from a part time career in the National Guard than my Brother will as a full time, active duty member of the federal military. For the same length of career (and my brother spent far more time deployed). Technically its the same, default military pension. But that default changed not long after my Brother signed on. Many, many, many public sector employees have been forced into early retirement before they hit key pension marks. In response to calls to cut budgets, and especially in reaction to the sequester. And it isn’t uncommon these days to see your pension benefits/levels cut as the result of attempts to break unions, or massive politicized shit fits about all these public employees leaching off the government.
Basically if you didn’t already have a public pension pretty much locked down by 2008. You fucked. If you worked in the private sector and you’re under 60. You probably fucked.
Plenty of people have lost their ‘whatever personal account’ money after retirement… and real world stats say most never manage to pile up nearly as much as the value of a pension.
Do you really think the Mitt Romney’s of the world will find it harder to suck the money out of a nurses’ 401k than they did to suck it out of a pension fund?
For what it’s worth that’s a lot less of a problem in the UK. Up until the mid-90s grants were still available for students, and tuition fees were only introduced in the early 2000’s (You could make a good case for starting the millennial generation in England from the first people to have to pay tuition at uni, ie my school year).
Student loans were somewhat controlled, there’s an official Student Loans Company, with a fixed (fairly low) interest rate. The loan is only repaid once you reach a certain level of salary, and it’s taken at the same time as tax (ie most brits just see it as another line on their pay slip). They’re never going to send in the debt collectors, and it’s written off after twenty five years.
(I only just realised this, so I’ve only got ten years left!)
So UK (mainly English) students don’t have as much debt, and it’s not as important as US students seem to have, but we still live somewhere where old people own most of the houses so we can’t even consider buying a house.
As Mark Twain may have so succinctly put it: “there’s lies, damned lies, and statistics.” The workforce participation rate is down. Unemployment only measures people kn the Dole, which as we all know, is really hard to be on thanks to measures like Work To Live (even when you have severe disabilities). Pay has not kept pace with inflation since 2000. The US economy is a lie o. The verge of total collapse as historically high levels of underemployment near 1930s levels.
And then there’s the quality of the jobs. The 3.9% unemployment figure could be a true reflection of how many people are employed (as you note, it isn’t), but if most of them are working precarious part-time jobs that don’t pay a living wage and offer no health benefits it’s still not a healthy situation. And that’s where we’re at.
I would guess that’s likely due to financial illiteracy. It’s really not that hard - follow Buffett’s advice and dump it in a broad index fund and never look at it again. Historically, the stock market has always gone up. Over a ~40 year career, you’ll be fine.
It’s not really that hard until you face a prolonged job loss, medical catastrophe or some other disaster. That pot of money will not sit unused until retirement if you face such calamities.
Generally, though, I agree, although it’s more discipline than literacy. If you are fortunate, you should be able to dump it into index funds, and then you’re tied to the market, which historically has been ok. But keep in mind, the safety net in the US is severely frayed. If you or your parents (ie, family) aren’t independently wealthy, better hope you don’t face a disaster.
There’s still a lot of room for shenanigans with a 401k plan if your company is targetted by a vulture capitalist for a bust out or if the company is just run by greedy or incompetent executives. It’s really a toss-up between a company’s defined benefits plan and a 401k, with the pros of one balancing out with the cons of the other, and vice-versa.
As with health insurance in America, the core problem for both is that the plan is controlled by the employer and is thus used as a chain to bind the employee. You could just as easily set up a system where the employer makes matching contributions and the employer realises the same tax benefits, but where the investment plan (which would amount to taking Buffett’s advice) is under the control of the employee.
The best option for a worker is to have a defined benefits plan from a strong union. It’s relatively rare outside public sector professions like teachers and police, but you get stability, serious fund management, institutional-investor clout and economies, and input into investment decisions. If the employer gets taken over or goes under, the union pension is still there. If they try to change the terms, it’s not as easy for a union to do it as it is for an employer.
Full state pensions are another option, but I doubt they’ll fly here.
I’m curious what you mean by this. It’s my money, contributed pre-tax by me into my own account. The employer match vests immediately, and it’s in my account. What shenanigans are going to happen to take it away from me by management.
