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The goal of retirement security for workers in the United States is disappearing. The following chart shows that the security of defined benefit plans has diminished greatly over the last 30 years.
Chart from the web pages of the Employee Benefit Research Institute – http://www.ebri.org/about/facts/
Current trends seem to be accelerating the disappearance of retirement security:
• A national clamor to reduce or eliminate defined benefit retirement plans in the public sector is gaining momentum toward a goal of eroding retirement security for public sector employees.
• Increasingly we are hearing that Social Security and Medicare, the lynchpin of core retirement security for working Americans, is unsustainable in its current form, setting the stage for changes that are likely to force people currently under age 50 to pay more and delay retirement until at least age 67, perhaps older.
• The growth of defined contribution plans as the primary means to provide funds for retirement years leads most working people into a world of investment for which they are ill prepared and creates vulnerability to myriad fees and charges by fund managers and brokers (annual fees, investment fees, redemption fees, etc.) further eroding retirement savings.
• The June 13, 2011 issue of Fortune magazine quotes a survey that found that 41% of Americans are not saving anything toward retirement and a report by the Employee Benefit Research Institute reports that 70% of Americans acknowledge they are behind schedule in planning for retirement.
This is the most nonsensical garbage I have ever seen. Defined benefit plans are being abandoned not because of any effort to jeopardize worker retirement security but because they are bankrupting forces on virtually any organization that utilizes them.
A “defined benefit plan” is one in which the amount of retirement to be received by the retiree is unrelated to either the savings of the retiree or the amount of money invested or set aside by the organization for that retiree. Instead, the retiree receives a fixed payment based upon assumptions made at the beginning of the plan.
These plans were in vogue in the 70’s and 80’s and were seen as a progressive step for workers. Unfortunately what private companies soon learned was that because the obligation to the worker was not tied to the economy or the “real world” performance of investments, payouts were many times the amount that any investor could have earned on the money set aside. Companies had to dip into present profits to pay for pensions that had grown hugely disproportional to what was intended. In the 90’s most large companies moved away from defined benefits and began contributing toward traditional 401K investments in which the retiree gets the entire benefits of all that is put away, but nothing more.
Public agencies are the last bastion of this failed and economically unsustainable practice. I wish the blue line on the chart above would rest on the zero mark – any agency that is still providing a defined benefit is poorly managed.
Between the post and the comment of Jeff Wills, looks like the idea of retirement security is a hopeless myth for the masses of people who work for a paycheck. Sad.
There was a time when we all thought it possible – apparently in error.
Geoff – I want to be sure you understand that the chart shown is for private sector employers and employees (as identified by the heading words “Private Sector —-“)and does not include the public sector. Given that, are you still an advocate for the blue line going to zero? If so, please elaborate on why you want to see that in the private sector. And, to clarify my view – I do not claim these trends are, to use your words, “any effort to jeopardize worker retirement security”, but rather that an outcome of these trends is that retirement security is being eroded. I do not necessarily believe the goal is to reduce retirement security, but do believe it is a consequence. The real quesion is so what – are the workers of the nation just going to accept that as a fact of life – which seems to be the case to date – or will the light bulb go on at some point about the consequences of having an aging population that is no longer valued as workers nor do they have retirement income adeuate to maintain their standard of living?. What does the lack of retirement planning by indivuduals and collectively a large number of the working population mean for our country down the road? Looks like we will find out.
In the meantime, executive pay just keeps on going up and up. Screw everyone else–the Republican mantra.
Rapscallion.
I have the answer for you. Take a risk and create your own business where you can work 80 hours per week, including Saturday and Sunday, and pray that you might survive.
In seeking funding for a new business the banker told my colleague that 80 percent of new businesses don’t survive in the first year. Another10 percent are marginal at best. It’s called risk/reward.
If you feel under-appreciated and under compensated than why are you working for that employer?
Managers get to the top by several routes. While some get there by inheritance and/or working in a family business others excelled in college with a minority getting there by hard knocks.
A half century back I worked at a famous name brand electronics manufacturer in Jersey City where one of the vice presidents had only made it past the sixth grade. He earned his stripes.
Stop complaining and looking for more entitlements. Do you want a hand up or a hand out?