How America's Retirement Crisis Is Crushing the Hopes of a Generation of Young People
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The crucially important but largely missing context of today's debate over so-called “entitlement reform” (read: slashing Social Security benefits and shifting more healthcare costs onto seniors) is that we stand at the early stages of what's shaping up to be a massively painful retirement crisis.
And while there has been a longterm project among granny-bashing “entitlement reformers” to fuel a sort of intergenerational class warfare by accusing "greedy geezers" of hurting young people's prospects, the reality is that this growing retirement crisis is hurting not only older workers and retirees, but also the newest entrants into the workforce, a generation of young Americans whose prospects are far bleaker than those enjoyed by their parents.
If you're nearing retirement age – or have a parent or grandparent nearing retirement age – you're no doubt aware of how 40 years of stagnant middle-class wages and the disastrous shift from traditional pensions to 401(k)-type plans has made a dignified retirement all but impossible for all but the very well-to-do. According to the Bureau of Labor Statistics, the share of private sector workers responsible for their own retirement savings increased nearly four-fold between 1980 and 2008 ( PDF).
This trend has been an integral part of what Yale political scientist Jacob Hacker called the “ great risk-shift,” in which the burden of paying for education, healthcare and retirement has been increasingly shifted from corporations and the government onto the backs of individuals and families. This graphic from the Center for Budget and Policy Priorities tells the tale:
Wall Street, and its allies in Washington, swore that this transition to private accounts would harness the awesome power of the market to make us all wealthy in our golden years. In Forbes, Edward Seidle writes, “as a former mutual fund legal counsel, when I recall some of the outrageous sales materials the industry came up with to peddle funds to workers, particularly in the 1980s, it’s almost laughable—if the results weren’t so tragic.”
There was the “Dial Your Own Return” cardboard wheel of fortune that showed investors which mutual funds they should select for any given level of return. Looking for 12%? Load up on our government plus or option income funds! It was that easy to get the level of income needed in retirement, investors were told.
Like so many promises of the vaunted “new economy” popularized by Ronald Reagan and supported by both parties since, this was a scam with disastrous consequences. According to Teresa Ghilarducci, a professor of economics at the New School for Social Research, “seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.” She adds: “The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.”
Today, two-thirds of retirees rely on Social Security for more than half of their retirement income, and for more than a third, those benefits make up at least 90 percent of their income. The average benefit in 2012 was just $14,760, and while talk of decreasing the cost-of-living adjustment has been all the rage in Washington, the reality, according to the Congressional Budget Office, is that the cost of living for seniors has increased faster than Social Security benefits, meaning that their real value has been falling even as people increasingly rely on them to get by.
How does this hurt younger workers? As it becomes more and more difficult to retire after busting one's ass in the American workforce for 40 years, an increasing number of older people have no choice but to remain in the workforce. Some work part-time; because of age discrimination, others take whatever jobs they can get, even if they're wildly overqualified. According to the Social Security Administration, “the labor force participation rates of men and women aged 62–79 have notably increased since the mid-1990s.”