September 18, 2013
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Danger Ahead: Our Disappearing Pensions
I ’ I — —
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X Ï X
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The vaunted 401(k) revolution
has left few with a nest egg
S am P izzigati
H o w ’s
your
40 l(k ) doing?
W orking A m eri
c a n s a s k th e m
selves this q u e s
tion — and angst
about the answ er — a great deal
these days. A nd w hy not? F or m ost
A m ericans, retirem ent reality has
turned chillingly stark: E ither you
have a robust set o f investm ents in
by
y o u r 401 (k) o r y o u ’re facing som e
really rocky happy years.
A generation ago, working Am eri-
cans d id n ’t have to obsess ab o u t
retirem ent savings accounts. A m eri-
cans had pensions back then, not
4 0 l(k )s . T h e se p e n sio n s re p re -
sented a com m itm ent from em ploy-
ers to w orkers: You w ork here a set
num ber o f years, you can count on
a m onthly pension at a set am ount,
In these traditional pension plans,
the risk rested w ith em ployers.
T hey shouldered the resp o n sib il
ity fo r funding a pension p la n ’s
“defined b en efits.”
W ith 401(k)s and the like, em
ployees have no prom ised “d e
fined b en efit.” T h eir future retire
m ent incom e depends on how well
th eir 401(k) inv estm en ts en d up
doing, not how long o r how dili
g en tly th e y ’ve w o rk ed o v e r the
course o f their careers,
In oth er w ords, the retirem ent
risk has shifted, from em p lo y er to
em ployee.
O u r current 4 0 l(k )s actually be-
gan in the 1980s as a supplem ent,
not a substitute, to traditional pen-
s io n p la n s .B u tA m e ric a ’s to p c o r -
porate execs q uickly cam e to see
th e se in v e stm e n t v e h ic le s as a
ch eap er — fo r em p lo y ers — alter-
native. B etw een 1990 and 2010, the
share o f A m e ric a ’s priv ate-secto r
«
em p lo y ees in traditional pension
plans fell by nearly half, from 42 to
22 percent.
T his huge d ro p -o ff in traditional
p ension participation, says a new
E conom ic Policy Institute report, is
g enerating both angst and in eq u al
ity.
A m ong A m erica’s m ost affluent
20 percent, 88 percent have savings
sitting in a 401 (k) o r sim ilar re tire
m ent savings account. T he savings
in the accounts o f these affluent
A m ericans averaged $308,674 in
2010, the m ost recent year w ith data.
In A m e ric a ’s statistical m iddle
class, by contrast, a totally different
reality. O nly 52 percent o f A m eri
cans in the m iddle fifth o f the nation ’ s
incom e distribution have savings in
retirem en t accounts, and these a c
counts average only $34,981.
A nd A m e ric a ’s poorest fifth has
an even bleak er retirem ent outlook.
O nly 11 percent o f those A m ericans
have any 40 1 (k ) savings, and these
savings average ju s t $7,543.
T hese unequal outcom es should
su rp rise no o n e. P a rticip a n ts in
4 01(k)s and sim ilar plans have to
contribute to participate. In an era o f
sh rin k in g real p ay ch eck s, m an y
em p lo y ees sim ply c a n ’t afford to
set aside m uch, if any, m oney for
their retirem ent.
T hose A m ericans w ith co m fo rt
able incom es w ho can afford to set
aside the m axim um possible sav
ings in their 401 (k)s go on, in turn, to
b e n e fit fro m b o th the sta n d a rd
e m p lo y er’s 401 (k) m atching contri
bution and the tax breaks that all
401 (k) savings enjoy.
T he p redictable result: T he gap
betw een the affluent and everyone
else stretches even wider.
W e have m oved, in short, from a
traditional pension system w here
“m any retirees could count on p re
dictable, co n stan t stream s o f in
c o m e,” as the new EPI study notes,
to a system w here m ost A m ericans
c a n ’t afford to retire.
“F o r a large sw ath o f A m erica,”
M a r k e tw a tc h a n a ly s t M a tth e w
H eim er adds, Social S ecurity has
becom e “the only rem ain in g fin a n
cial crutch fo r retirem en t.”
In the m eantim e, m any o f the sam e
corporate execs w ho’ve cut back on
traditional w orker pension coverage
are spearheading the charge for cu t
backs in Social Security.
L ast fall, m y In stitu te fo r P olicy
Studies colleagues lo o k ed at the 71
big-tim e C E O s p u sh in g the “Fix the
D ebt” cam paign to trim Social Secu
rity and o th er m ajo r federal “en title
m en t” program s. T hese 71 top execs
have accum ulated, on average, $9
m illion each in their ow n personal
co m p an y p ension plans.
A dozen o f these C E O s have
o v er $20 m illion in th eir pension
a cc o u n ts.
If at age 65 these dozen co n
v erted th eir assets to an annuity,
the Institute for Policy Studies re
searchers note, “they w ould receive
a m onthly check for at least $ 110,000
for life.”
OtherWords columnist Sam
Pizzigati is an Institute fo r Policy
Studies associate fellow.
Move
My grandma’s
words have
guided me
m e to the core.
A fter so m any historic civil rights
v ictories, how co u ld it be that m y
g eneration had gro w n up ju s t in
tim e to find itse lf the m ost m urdered
B enjamin T odd J ealous
In m y tim e as an
I
organizer, I have
been guided by the
w o rd s o f m a n y
people - activists
and authors, c o l
le a g u e s
and
friends. B ut the m ost pow erful les
by
so n I e v e r re c e iv e d a b o u t th e
struggle fo r civil and hum an rights
cam e in 1993, w hen m y grandm other
taught m e that history could m ove
in tw o directions at once.
I w as in college, celebrating a
friend's 21st birthday. A round o f
toasts w ent up. O ne friend raised
his glass to h o n o r the m em ory o f all
those w e knew w ho had been killed
o r sent to prison before they reached
the age o f 21. A nother friend lifted
his cup to toast to the fact that one
m ore o f us had lived long enough to
reach the quintessential age o f adult
h ood.
I could not raise m y glass on that
last toast. In fact, it felt as if the
m otion cut m e like a knife.
T he notion that a m an o f any
race, o f any age, in the w orld's great
est and w ealthiest dem ocracy, could
think it an accom plishm ent to sim
ply breathe past the age o f 21 - it cut
g eneration in the co u n try and the
m ost incarcerated g en eratio n on the
p la n et?
So I did w hat I alw ays did w hen
I a m s tu c k . I w e n t to m y
g ran d m o th er’s table and I laid m y
burdens dow n.
I said, "G randm a, you told m e
that m y g eneration w as supposed
to be the first g en eratio n to be
ju d g e d not by the co lo r o f o ur skin
but by the co n ten t o f o u r character.
N ot because o f w hat w e are o r w here
w e co m e from - but because o f w ho
w e are and w here w e are headed.
W hat happened?"
M y grandm a go t real quiet. She
looked at m e w ith sad eyes and then
she said, "Son, it's sad but it's sim ple.
W e go t w hat w e fo ught for, but w e
lost w hat w e had."
T hose are w ise w ords to rem em
b er in tim es like this.
W e got the rig h t to be police
officers, but w e lost the right to live
in safe co m m unities. In C hicago, a
culture o f po v erty -fu eled gang vio
lence h as reinforced the notion that
living until 21 is an accom plishm ent.
W e g o t th e rig h t to sen d o u r
c h ild re n to an y sc h o o l, b u t w e
lo st th e rig h t to a ssu m e th a t th ey
w o u ld re c e iv e a g o o d e d u c a tio n
at w h a te v e r sch o o l th e y a tte n d .
In P h ila d e lp h ia , the sch o o l s y s
tem is facin g a $ 3 0 0 m illio n b u d g et
g a p th a t a lre a d y d e la y e d th e start
o f th e sc h o o l y e a r an d th re a te n s
to d e v a s ta te s u p p o r t s t a f f a t
sc h o o ls in th e m o st u n d e rs e rv e d
c o m m u n itie s.
W e got the right to live in any
co m m u n ity , but w e lost the right to
kn o w that o u r children w ould be
p ro tected by the p olice - o r the
com m unity w atch volunteers - w ho
are supposed to serve them . In 2011,
before N ew Y ork C ity passed a ra
cial pro filin g ban w ith teeth, the
N ew Y ork Police D epartm ent m ade
m ore stops o f young black m en
b etw een the ages o f 14 and 24 than
there w ere y o ung b lack m en b e
tw een 14 and 24 in the city.
In h er sim ple w ay, m y g ran d
m o th er spoke volum es about o u r
h isto ry and issued a subtle ad m o n i
tion fo r the path forw ard. She re
m in d ed us that w e m ust be clear on
both w hat w e are fighting for, and
how w e will protect w hat w e already
have.
W hat are w e fighting for? First
and forem ost, w e are fighting for our
children: fo r th eir futures to be ro
bust, th eir eq u ality to be affirm ed
and th eir lives to be protected. T hat
is w hy the civil rights com m unity
lifts up education o v er incarcera
tion, and econom ic liberation over
discrim ination.
W h at d o w e n eed to p ro te c t? If
e a c h o f us h as a n y th in g - ev en
th o s e o f us w h o d o n 't h a v e a
h o u se , o r a car, o r a fam ily to feed,
m ay no t be th e m o st im p o rta n t
is su e to a n y o n e o f us, it n e ed s to
b e th e m o st im p o rta n t fig h t fo r all
o f us.
M y g r a n d m a 's w o rd s h a v e
g uided m e o v er the years, and they
w ill continue to guide m e th rough
o r a n y e a rth ly p o sse ssio n s at all -
as so o n as w e tu rn 18, w e h a v e the
rig h t to vo te. T h is is the rig h t th at
has been w on and expanded
th ro u g h the A m erican R ev o lu tio n ,
C iv il W ar, th e w o m e n 's su ffra g e out m y career. W e should heed her
m o v e m e n t an d th e c iv il rig h ts im portant rem in d er that history can,
m o v e m e n t - b e c a u se w e h a v e a l and often does, m ove in tw o direc
w ay s u n d e rs to o d th a t w e are u lti tions at once.
m a tely re n d e red d e fe n se le ss w hen
Benjamin Todd Jealous is the
o u r a c c e ss to th e b a llo t b o x is president and chief executive of
d im in ish ed . So w h ile v o tin g rig h ts ficer o f the national NAACP.
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