By Buzz Davis – America has a major crisis in Wisconsin and the Nation – the looming lack of financial security in retirement.
Today we have the best-off seniors America has ever seen. But still many live in poverty or near poverty. Seventy million Baby Boomers now headed into retirement will not do as well as today’s seniors. In coming years nearly half of middle class families will retire into poverty or near poverty. For seniors poverty today is living on less than $11,000 annually and for couples it is less than $15,000.
All this did not happen by accident. And we will not solve this problem with false hope, denial or slogans.
How many of you are already financially helping your elderly parent(s)? How many are financially helping your young adult children? It is extremely difficult to save money for retirement when doing these things or if you’re unemployed, underemployed, or forced into part-time work.
Since 1970, worker productivity, corporate profits and the 1%ers’ income all skyrocketed. But workers’ wages have been suppressed. Both adults in most households now work. Many work longer hours. Yet many families still can’t get ahead.
By 2012 nearly all those good corporate defined-benefit pension plans were flipped to 401(k)s which, in general, do not provide financial security. Today over half the private sector workers still have NO pension plan.
If Wisconsin reflects the nation, then we have about 1.4 million Wisconsin households with couples ages 34 to 64. Experts say these households, on average, have a shortfall of about $90,000 in retirement savings. This means they need $90,000 MORE TODAY in retirement savings than they have. The estimated pension savings shortfall for those Wisconsin families is about $126 billion. Do you hear the politicians and corporate leaders talking about that? Nationwide, 70 million households have an estimated $6.6 trillion pension-savings shortfall.
Why are we facing this retirement crisis? Because over half our workers have no retirement plan. About one-third have 401(k)s. Seventy five percent of workers nearing retirement have less than $30,000 in their 401(k). Some of Wisconsin’s workers are fortunate to have a defined benefit (DB) pension plan from their government, school or large corporate employer. The DB plan is the one that pays you a monthly fixed check for the rest of your life based upon number of years you worked, earnings record, and age at retirement.
How did we end up in this fix? Why aren’t political leaders offering solutions to the looming retirement crisis?
By the early 1980′s, 35% of all workers were unionized. Most large corporations were unionized. Most people know that unions push for good defined-benefit pensions because these are the only pensions that provide security in retirement during good and bad economic times. At that time, about half the private sector workers had a pension plan and half had nothing. Nearly all those pension plans were defined benefit while a few had 401(k)s.
Then the US government and corporations set out to crush the unions or flee to non-union states or countries. Remember Pres. Reagan’s handling of the air traffic controllers’ strike for better safety procedures? He fired them all. Today only 7% of all private sector workers are unionized. Millions of good jobs have been offshored. By 2012 nearly all those good corporate defined-benefit pension plans were flipped to 401(k)s which, in general, do not provide financial security. Today over half the private sector workers still have NO pension plan.
That did not happen in the public sector. Unionized public workers kept fighting for good defined benefit pension plans through their union representation.
The public sector pension funds are run more economically, have better returns than 401(k)s, and provide retirees with a fixed monthly check for life. Those regular pension checks plus Social Security and some savings allow public workers to live comfortably in their senior years. A vast majority of each pension check comes from investment earnings – not tax dollars. And the trillions of dollars in public pension funds are invested in the private sector helping our nation’s economy.
The private sector does many things well. But due to corporate avarice, it has blown the retirement security issue for its workers. We must look to the public sector for the solution.
The Wisconsin Retirement System (WRS) is one of the few premier public pension funds in the world. It pays a defined benefit monthly check to nearly 170,000 retired Wisconsin public workers.
The questions now before us are:
- How can we use the WRS as a model to develop a “sister” state-managed, defined-benefit pension plan for private workers who have no pension plan or only a 401(k)?
- How can we encourage people and groups to come together, learn about the retirement crisis, and develop solutions?
- All workers deserve financial security in retirement. How can we inject this issue into the November elections for state assembly representatives and senators – so we can begin to face the retirement crisis head-on?
If you are concerned about your own or your children’s retirement future, please contact your state legislators. Ask them to start investigating this issue, developing some solutions, and keep you informed of their progress.
– Buzz Davis is a retired state government planner, is a member of the AFT-W Retiree Council Executive Board, AFT-W’s representative to the Wisconsin Coalition of Annuitants which represents 35,000 state, local and education retirees, and a member of Wisconsin Alliance for Retired Americans.
Sources: New York Times – Our Ridiculous Approach to Retirement; The Week – How 401(k)s are Failing Millions of Americans; US News – 7 Reasons You don’t Have a Pension; Retirement USA – Facts of the Day; Pension Rights Center Testifies in Support of a Connecticut Bill about Public Retirement Plans