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Abolish the 401(k)

America’s retirement security policies are facing a major crisis. No, not the problem that Pete Peterson, Alan Simpson and Erskine Bowles and other so-called deficit hawks have become famous for exaggerating — the relatively minor mismatch between promised Social Security benefits and scheduled Social Security payroll taxes in the 2030s. The real crisis facing current and future retirees in America’s aging society is the failure of the private components of America’s mixed public-and-private retirement system.

When Social Security was created in 1935, it was not intended to be the sole source of retirement income for most Americans. It was assumed that employer-provided defined benefit pensions with guaranteed payouts would supplement Social Security checks for many workers after they retired.

Unfortunately, employers have been abandoning defined benefit pensions for decades. The number of private sector workers with defined benefit pensions has fallen from around 40 percent in 1980 to a mere 15 percent today. At the same time, among public sector workers, poor management by state governments, combined with years of economic trouble, has created a crisis for public pension systems in many states.

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