With declining earnings and a culture of borrow-and-consume, America's workers face a future of uncertainty and little money to pay for their retirement.
By Scott Thill, AlterNet
July 20, 2010
The days of quietly retiring with a nest egg built up from years of savings from a long career on the verge of disappearing. For tens of millions of Americans, facing rising costs, shrinking incomes and growing debts they already have disappeared.
"One out of three working Americans does not have retirement savings beyond Social Security, and about 35% of those over 65 rely almost totally on Social Security alone," Dallas Salisbury, president of the Alliance for Investor Education and the Employee Benefit Research Institute (EBRI) , explained to AlterNet. "Of the remaining two-thirds of working Americans that have some retirement savings, 27 percent report less than $1,000, 16 percent between $1,000 and $9,999, 11 percent between $10,000 and $24,999, 12 percent between $25,000-$49,999, and 36 percent $50,000 or more." Perhaps the most shocking number is that half of Americans have $2,000 or less saved for retirement.
Crunch the numbers and you end up with a retirement myth, rather than a money-maker. We face a colder economic reality: Not only are there no astronomical retirement returns coming down the financial pike, but what nuts and nest-eggs families have set aside for their futures have been mostly sucked dry.
"Individuals need to follow the advice of the ages," said Salisbury. "Spend less than you earn by 25 percent, and save for your future. This keeps your lifestyle from getting ahead of your income."
While saving 1/4 of our shrinking incomes sounds nigh on impossible in this economic climate, many are watching their savings getting squandered by bad fund managers. One retirement Ponzi scheme starting to worry the Senate Special Committee on Aging, according to an aide who asked not to be named, are target-date funds, a financial instrument . They're basically mutual funds that try to play equities and stocks in their early years before settling into more conservative investments like cash and fixed-income before maturing, so as not to give their investors heart attacks on the date of their retirement. As imagined, given our wheezing global economy, target-date funds are leaking money to managers who are charging insane fees before the house of cards crashes. In July, the SEC proposed new rules to make target-date funds more transparent, but lately the SEC has been proposing much while the banksters and executives that really run the country have continued to fund everything from Barack Obama's election to the Republican Party itself.
In related news, the Supreme Court ruled that corporations are free to spend, pardon the pun, as much as they want to buy political candidates In other words, even if your target-date fund survives the banksters' scams by the time it finally matures, there's no guarantee it can't be downsized by them at a moment's notice. To quote Wikipedia, "almost all target date funds do not have any guarantee." The banksters and the SEC know it, and now so do you.
But what can we do about it? Nothing, if we don't accept the fact that we're quickly turning into a world of freelancers in search of our next check. Which, of course, we'd all like to divide accordingly to live comparatively well and invest in a nest-egg for a more convenient future. But in an economic environment that is alternately unable to provide job growth or security, and is infested by market-makers armed with supercomputers and math and Ph.Ds, that's unlikely and illogical.
"I think Americans will no longer have retirements that demand no additional work," Sara Horowitz, executive director of the nonprofit Freelancers Union, explained to AlterNet. "They will lessen work in old age. In other words, retirement will increasingly mean becoming an independent worker."
Living like freelancers would go a long way to ameliorating our dependence on investment banks and other entities whose traditional function was to take our money and stash it smartly, where it could feed on modest interest rates that were not the plaything of freelancing hedge funds and their proprietary algorithms. But in today's hyperspeeding electronic market, there are just too many easy marks in the matrix.
"Goldman Sachs in the 401k world is no better or worse than the others," said Horowitz. "We need to move away from the idea that individuals will go by themselves to for-profits and be OK. They won't be OK. They're little bitty consumers dealing with giant corporations. Instead, they should band together and spread the costs for experts and lawyers to level the playing field. In the 1970s, freelancers were the first to lose the employer's safety net, so they've been working this way for several decades. Instead of being isolated individuals, they form strong networks for information, community and benefits. Freelancers have to be more disciplined at setting money aside to pay taxes and benefits that traditional workers expect their companies to pay. And they have to purchase their own safety nets -- health insurance, unemployment, and retirement -- which makes it that much more difficult to save."
In short, they have to live in a real world of diminished returns, expectations and impact. Which is a good thing, given the new millennium's spiraling hyperconsumption. If the gushing oil bleeder in the Gulf of Mexico is a sign of anything, it's of our excessive appetites. Today, it's time pay up, especially if we want to retire later. Our messy ways and means have to be choked off and cleaned up. If we're smart, live well below our lucky means, and stop trashing the planet, and its political processes, then we might just get lucky enough to dodge the guilty bullets.
"I think freelancers will actually be better off in many ways than traditional workers," concluded Horowitz. "Because a future without a safety net has been their reality for the last 25 years."
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