Retirement Security – an oxymoron?

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Twenty to thirty years ago high school students were encouraged to go on to college to get a degree that would lead to a good job somewhere with benefits, including a defined benefit retirement plan. The message was that if one got educated a career would be available that would eventually lead to a comfortable retirement in the so-called golden years.

Social Security was billed as a program that was never intended to provide all the income needs of senior citizens, but as a supplement to a retirement plan that should also include personal savings for retirement. To encourage those personal savings along came federal legislation for IRA’s and 401k’s, and some employers went so far as to match money that their employees put into those retirement savings accounts. Everything seemed well planned to assure career employees a comfortable retirement. Though most government agencies did not participate in Social Security, their other retirement plans appeared solid and offered the employees the security of the government entity itself. Retirement security for many working people in both the private and public sectors seemed to be achievable.

Then, something began to happen. Business pressures from start-ups and foreign-based companies that did not offer such benefit packages began to erode and in some cases eliminate the profits of some companies. The quest for increased profitability and sometimes for survival itself led to searches for costs that could be cut. The defined benefit retirement plans offered in the private sector began to disappear as cost cutting became the priority and some businesses raided their retirement funds for current business cash flow needs.

A federal stop-gap program known as the Pension Benefit Guaranty Corporation was created in 1974. By means of a tax on employers, it established a fund to guaranty private sector retirees at least some retirement income should their former employer’s pension plan go belly up. Perhaps you remember reading a few years ago about retired United Airlines Pilots with retirement income well into the 6-figure range suddenly having to make do with the maximum the Pension Benefit Guaranty Corporation could offer, which was about one-third (or less) of what they had been receiving before the airline and its pension plan went bust.

I recently read that only about 23% of private sector employees have a defined benefit retirement plan. The trend continues downward.

Currently the focus is on the public sector which tends to offer a secure retirement in the form of defined benefit retirement plans in almost all cases. Those who work in the private sector, or used to before they lost their jobs in the recession, look at those retirement plans with both envy and anger. Envy, because they wish they had such a secure retirement plan. Anger because these are public servants, after all, and how can it be that they have the promise of a secure retirement when most of the rest of us do not? Then, factor in the current state of most government retirement plans – it seems our elected officials that have over the years put those plans in place have failed to adequately fund them – leaving future retirees and taxpayers to face the future with a good degree of uncertainty.

The solution that seems to be increasingly embraced by the public is to move public sector employees into the same fuzzy retirement future that 80% of private sector workers now face – the 401K and/or IRA alternative to save for retirement. How has your 401k done this last decade? I know that mine has not grown enough to lead to a secure retirement. And we all know that Social Security is in trouble.

So, is the answer to the dream of a secure retirement to give up on that dream and plan to work – until the day we drop – assuming an employer will have us? Or, is there a path to a secure retirement that can be blazed for us all? Is there such a thing as the potential for a secure retirement for the working class these days? It’s not looking good. Maybe you have a story to share about what your own retirement future is looking like.