Andrea Batista Schlesinger

DMI on the SOTU: “Put aside partisan politics to get this problem solved.”

The right to a dignified retirement is at the cornerstone of what it means to be middle class in America. First through his Social Security privatization scheme, and then through the administration's silence on the impending pension crisis, the Bush administration has left the middle class to fend for themselves, using their retirement security as an experiment in market-based denial.

" 78 million baby boomers are poised to retire in the next two decades, with an unprecedented 20 percent of the U.S. population expected to be 65 or older by 2030. At the same time, Americans are living longer than ever before.

" With a lower number of working-age people for each retiree, these demographics will further strain the nation's already stressed Social Security and Medicare systems.

" 2005's failed attempt to remake Social Security as a system of private accounts with a declining public contribution highlighted an ideological divide between the majority of Americans intent on maintaining a degree of publicly-guaranteed retirement security and those intent on introducing new elements of individual risk into America's largest social insurance program.

" At the same time, private employers are accelerating the trend toward greater individual risk, with even large profitable companies like Verizon and IBM increasingly shifting from traditional defined benefit pension plans (in which individual benefit levels are guaranteed and the employer bears the risk of a market downturn) to defined contribution plans like 401(k)s (where there is no individual guarantee about the amount of retirement income that will available), even though individuals may lack the time and information to manage their 401(k)s and make wise investment decisions.

" With a decreasing ratio of working employees to pensioners and soaring insurance costs, a growing number of employers have under-funded their pension plans, raising fears that they will ultimately need to be a bailed out by the federal Pension Benefit Guarantee Corp. which already has a deficit of $22.8 billion. Meanwhile, companies and their stakeholders are concerned that legislation to require full funding of pensions and more clearly disclosure of pension liabilities to investors will be so costly as to cause mass layoffs.

" The federal, state, and local governments face similar strains in financing public employee retirement benefits.

" More than half of today' workers lack employer-sponsored retirement plans.

" American's historically low rate of personal savings- fewer than ten percent of eligible workers contribute the maximum to their 401(k) and about 25 percent contribute nothing. While financial advisors recommend setting aside ten to twelve percent of wages for retirement, middle income Americans are juggling debt, buying a home, sending their children to college, and dealing with unexpected medical costs, making this unrealistic for many.

" Retirement security is not only relevant to the elderly and those about to retire: guaranteed retirement security frees families to invest resources in their children rather than supporting their parents.

" The administration's silence on the pension crisis is as damaging to the hopes of the current and aspiring middle class as last year's failed privatization scheme. The only way that retirement security will continue to be integral to the definition of the American Dream is if the administration tackles the problem directly and offers real solutions that speak to the reality of most American's lives.

Andrea Batista Schlesinger: Author Bio | Other Posts
Posted at 9:44 PM, Jan 31, 2006 in Retirement Security
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