Funding Secure Retirement (With Government Promises)

RetirementThe coming retirement crisis is aging news but even more real than workers seem to appreciate. It is of course, a creation of government. You are welcome to disagree on that, but be prepared with facts rather than fancies, please. We’re pretty sure of this one.

Here it is: First, Social Security does not have enough money available to pay present pensions; it has to borrow to stay current. The generations now retiring are the “baby boomers” so the demand for new pensions is rising. That leaves two questions: A. Where will the new money to pay the new pensioners be found?               B. Where will the money to repay the borrowings (and the interest) be found? After all, the government is already in deficit.

Second, only government pays retirement pensions now; private industry can’t afford them. Instead, we see 401 (k) plans that only contain whatever the worker has put in them, plus any employer contributions. No pensions are paid from these, only the amount originally put in plus any earnings, is paid out. It’s pot luck, there is no guaranteed payout as there is in a pension plan.

The problem is, few workers are contributing enough toward these 401 (k) plans or to IRA’s to actually fund retirement. Most find that after the government has collected all its myriad of taxes from them, they struggle to live on what is left, forget saving much for retirement.

So do the math: Social Security is now insolvent; the 401 (k) plans are severely underfunded. The primary parachute will not open one of these days, and the emergency chute won’t bear the weight. And if you are middle aged or more, there is likely little you will be able to do to deal with this. You’ve run out of time.

Why is it the government’s doing? First, because the governments’ overspending its income is a direct contributor to the condition. Simple irresponsibility, Next because it has been Federal Reserve policy keeping interest rates super low for years on end that has prevented pension plans earning enough on investments to afford to pay the pensions. If Congress had spent within its income and the Fed had not squashed interest rates, we would not see the present looming impoverishment of the about to be elderly.

Doesn’t it serve aging workers right for not paying attention while it has been happening? Yes. But there are few calories in that knowledge, nor will it keep you dry in the rain … or help your kids pay your bills when they inherit them.

You might see this neat trap as sufficient but there is one more piece: The governments’s policy of constant inflation. Prices have risen. It’s mostly gradual, we are used to it and pay little notice, especially as Congress raises the minimum wage from time to time. But consider: A 1937 Chevrolet could have been had for $750; a decent house, for around $3300. Incomes were proportionate. So if a worker saved a portion of his maybe $3000 wages for retirement, what would it buy him years later at the inflated prices in effect when he retired? Thank you, oh generous (with other folks’ money) and compassionate government!

But not to worry; we hear that Wal-Mart is going back to hiring doorway greeters …

About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much) Couple of degrees in government, a few medals in figure skating; just reading and suspicion for economics ...
This entry was posted in Economics, Government, Politics and tagged , , . Bookmark the permalink.

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