Pension Vocabulary: “Looming Retirement Crisis?”
On the heels of the
latest WTTW Chicago Tonight debate – a contretemps which found Illinois
Policy Institute spokesperson John Tillman promoting the need for public
workers' being forced into 410 k programs to (1) save the Illinois pension
system, (2) give Illinois public workers the opportunity to control their own
retirement destinies, (3) align the public workers retirement programs with the
successes of the private worker, etc. – comes
a seriously disturbing combination of studies from very disparate sources that
indicate the strong possibility of a looming retirement crisis for those
heading toward the end of their careers.
The Federal Reserve Board has just recently published its
triennial Survey of Consumer Finances.
The report is considered the gold standard for understanding the
household finances of American families.
Simultaneously, the Joint Center for Housing Studies of Harvard University
delivered the carefully researched challenges America will face meeting the housing needs
of an aging population over the next decade(s).
The full report by Mark Miller, former Sunday editor of the
Chicago Sun-Times and specialist on retirement issues, can be found at the link
following this blog. His piece is a sobering
assessment of what the future holds for those of us unlucky enough to have been
middle to lower middle class during the recession, especially if the end of a
career is approaching soon.
His article also clearly identifies the pitfalls in totally
investing one’s future retirement in a system designed to charge for
speculation of earned money without regard for significant fluctuations in an
individual’s holdings, a system originally designed as a supplementary savings
plan: namely, a 401k.
“The recession wreaked havoc on the
retirement plans of millions of Americans, and two studies released last week
suggest that most of us haven't recovered well.
“To be more precise: Middle- and
lower-income Americans haven't recovered at all, while the wealthiest households
have done fine.
“Harvard found that a third of adults over
age 50 pay more than 30 percent of their income for housing - including 37
percent of people over age 80. Harvard defines that group as “housing cost
burdened.” Another group of "severely burdened" older Americans spend
more than 50 percent of income on housing. That group spends 43 percent less on
food, and 59 percent less on healthcare, compared with households that can
afford their housing.
“The Federal Reserve findings on
middle-class retirement prospects are equally troubling. Despite the economy’s
gradual mending, the SCF found a widening gap in income and net worth. The top
10 percent of households was the only income band registering rising income (up
2 percent since 2010). Households between the 40th and 90th percentiles of
income saw little change in average real incomes from 2010 to 2013. And the
rate of homeownership was 65 percent, down from 69 percent in 2004 and 67
percent in 2010.
“Ownership of retirement plan accounts also
fell sharply. In the bottom half of income distribution, just 40 percent of
households owned any type of account - IRA, 401(k) or traditional pension - in
2013, down from 48 percent in the 2007 survey. The Fed attributes the drop
mainly to declining IRA and 401(k) coverage, since defined benefit coverage
remained flat. Meanwhile, coverage in the top half of income distribution was
much higher. In the top 10 percent, 95 percent of families are covered.
“Overall, the average value of retirement
accounts jumped a substantial 10 percent from 2010 to 2013, to $201,300. The
Fed attributed that to the strong stock market and larger contributions. But
for the lowest-income group that owned accounts, the average combined IRA and
401(k) value was just $39,100 - and that is down more than 20 percent from
2007.”
Note: Always remember this. Were the State or Rauner ever able to move
public workers to a 401k retirement system, it would not be protected under the
Pension Clause. If the State found that
matching contributions to a 401k plus the need for Social Security were too
much, the General Assembly could do away with 401k plans altogether.
Read the entire blog below.
http://www.reuters.com/article/2014/09/11/us-column-miller-retirement-security-idUSKBN0H61QL20140911
I'm already in the process of procuring a good quality paper box that I can put under a bridge at an intersection with good access to good garbage dumpsters. That's my new retirement plan. I just need enough newspaper to stuff into my shoes to keep my feet warm in the winter.
ReplyDeleteIn the meantime, Anony, I'm also stuffing all my money in my mattress.
ReplyDeleteWorked for the grandparents!
Illinois Pension Reform Conspiracy (or why a 401(k) is a foolish option, especially when it’s your only retirement plan).
ReplyDeleteDon’t be fooled by Rauner and some Illinois politicians’ saccharine prevarications about stabilizing the public employees’ defined-benefit pension plans. What some of them really want to do is reduce and weaken them so they are inevitably eliminated. Defined-benefit plans are lucrative opportunities for corporate predators:
http://teacherpoetmusicianglenbrown.blogspot.com/2013/06/illinois-pension-reform-conspiracy.html