Category Archives: Retirement

Welcome to the new dark ages, where only the wealthy can retire

Peter Fleming | February 14 2017 | The Guardian

As never-ending politically motivated austerity takes hold, more and more people will find they cannot afford to stop work. But it doesn’t have to be like this
‘If people want to work past retirement age, that’s great. The trouble is many soon won’t have any choice in the matter.’ Photograph: Radius Images/Alamy

It’s almost too easy to imagine the scenario. After spending most of our adult life in paid employment, the golden day arrives. A well-earned retirement. Suddenly we’re released from the grip of office email and that long commute. Finally we can enjoy our remaining time on Earth pursuing those interests we’d never had time for, perhaps reconnecting with family and finishing those repairs on the house. Above all, time to relax.

Sadly, this probably won’t be your future … unless you’re independently wealthy. What can only be described as the “battle over work” in the neoliberal era in relation to pay and conditions has just opened another front. Retirement. And things are beginning to get nasty.

We’re now told that the real question is no longer when we will retire but if we will retire, with the prospect of working until you drop likely to become the norm. Due to an ageing population, longer life expectancy and a state pension scheme that can’t keep up, retirement might soon be a thing of the past. According to David Blake, director of the Pensions Institute at Cass Business School, “the danger now is we will have a generation who really can’t afford to retire”.

Retirement was once considered the jewel in the crown of any civilised society. Discrediting the idea that it’s acceptable for the elderly to toil late into their twilight years was one of the great achievements of the 20th century. It wasn’t just about morality, of course. There was also an economic rationale. But giving people the chance to rest after 45 years of hard slog was deemed the decent thing to do.

Not any more. Now we have entered the age of austerity, one that we’re told might never end. As a result, there’ll be no government help in your dotage. Nor will your employer’s pension plan provide enough to make ends meet. If this heartless post-crash variant of neoliberal capitalism could be summed up in one message, it would be this: you are on your own.

Continue reading Welcome to the new dark ages, where only the wealthy can retire

‘A Tale of Two Retirements’: New Report Blasts Rigged Rules That Favor Corporate Execs

by Andrea Germanos, published October 28, 2015 at Common Dreams

‘Together, we can … allow for all Americans to be able to retire with dignity.’
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100 CEOs have as much in retirement assets as 41% of American families, a new report shows. (Photo: 401kcalculator.org)

Imagine a retirement account worth over $49.3 million.

For 100 Fortune 500 CEOs, it’s no dream—it’s their average retirement nest egg, according to a report, A Tale of Two Retirements, released Wednesday by the Center for Effective Government and the Institute for Policy Studies (IPS).

Underscoring the nation’s inequality, the CEOs’ retirement assets together total $4.9 billion, the same amount as that held by 50 million families—41 percent of American families—combined.

“The CEO-worker retirement divide has turned our country’s already extreme income divide into an even wider economic chasm,” said Sarah Anderson, IPS Global Economy Project director.

taleoftworetirements-aTake Honeywell CEO David Cote, who, the report notes, has promoted cuts to Social Security and is a founding member of the pro-austerity group Fix the Debt.  He stands to get a monthly retirement check of over $948,000, while General Electric chief executive Jeffrey Immelt stands to take in $463,000 a month.

David Novak, who was CEO of YUM Brands in 2014 and is now Executive Chairman, tops the list with largest retirement assets of $234 million.  That puts him on a path to receive a monthly retirement check of $1.3 million.

Those amounts make President Obama’s monthly retirement check of $16,975 look like a mere pittance. More importantly, they put into sharp relief the economic chasm between the CEOs and ordinary Americans. As a separate report released earlier this year showed, 55 percent (pdf) of those aged 50-64 will get about $1,200 a month, as they will have to rely nearly entirely on Social Security.

Continue reading ‘A Tale of Two Retirements’: New Report Blasts Rigged Rules That Favor Corporate Execs

Brochures for lump-sum pension offers don’t tell all you need to know

by Mark Miller, published March 19, 2015

Jim Hart from New York feeds the birds in Battery Park in the Manhattan borough of New York
Jim Hart from New York feeds the birds in Battery Park in the Manhattan borough of New York, December 18, 2014. REUTERS/CARLO ALLEGRI

(Reuters) – If you are due a pension from a former employer, there is a good chance you were or soon will be offered a lump-sum payment in exchange for giving up that guaranteed monthly check for life.

Should you take it? Probably not, but making a smart decision depends on a complex set of assumptions about future interest rates, possible rates of market returns and your longevity. It is a tough analysis unless you have an actuarial background.

Unfortunately, employers are not providing enough information.

That is the conclusion of a recent review by the U.S. Government Accountability Office of 11 lump-sum-offer information packets provided to beneficiaries by pension plan sponsors.

The key failings included unclear comparisons of the lump sum’s value compared with the value of lifetime pension payouts. Also lacking were many of the explanations of mortality factors and interest rates used to calculate the lump sums.

Continue reading Brochures for lump-sum pension offers don’t tell all you need to know

The Coming War on Pensions

by Michael Hudson, published April 12, 2015

On the Senate’s last day in session in December [2014], it approved the government’s $1.1 trillion budget for coming fiscal year.

Few people realize how radical the new U.S. budget law was. Budget laws are supposed to decide simply what to fund and what to cut. A budget is not supposed to make new law, or to rewrite the law. But that is what happened, and it was radical.

Wall Street’s representatives in Congress – the Democratic leadership as well as Republicans – took the opportunity to create an artificial crisis. The press called this “holding the government hostage.” The House – backed by the Senate – said that it would shut the government down at some future date if two basic laws were not changed.

Most of the attention has been paid to Elizabeth Warren’s eloquent attack on the government guaranteeing bank trades in derivatives. Written by Citigroup lobbyists, this puts taxpayer funds behind future bank bailouts if banks make more bad bets on complex financial derivatives, such as packaged junk mortgage loans.

Critics have focused on how there must be a loser for every winner in a derivatives contract. The problem is that if banks lose, the government will bail them out just as it did in 2008.

Less attention has been paid to what happens if banks win. They will win largely in making bets against pension funds. Indeed, pension funds have not been treated well by Wall Street in recent years.

They are in a bind. Pension funds will fall further and further behind what they need to pay retirees if they do not make the impossibly high returns of 8.5%.  The guiding philosophy of pension funds has been that instead of making employers pay enough to cover the pensions they have promised, funds can make money purely financially – by Wall Street sharpies.

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Significant pension cuts loom for retirees

by Mark Williams, published March 22, 2015, in the Columbus Dispatch

Since Whitley Wyatt retired in 2000 after 33 years as a trucker, he’s collected a pension of $3,300 a month.

Now, the 71-year-old says as much as $2,000 of his monthly check is at risk because of legislation passed by Congress last year that is meant to help underfunded multiemployer pension plans bolster their finances by giving them a way to cut benefits for some retirees.

“We definitely will have to adjust our lifestyle,” he said of him and his wife if there is a cut that big. “We have ongoing and increasing medical expenses. It could be catastrophic just from the respect of the money we contribute to charity and church (and) money we contribute to our grandkids for their future education.”

Wyatt, of Washington Court House, said he doubts many other retirees are aware of the risk to their pension as a result of the legislation passed in December as part of a spending bill meant to run the federal government through the rest of its fiscal year.

The legislation affecting the retirees was added at the last minute. It is targeted at companies that enter into pension plans with other companies.

There are about 10 million workers and retirees in 1,400 multiemployer plans, according to the Pension Rights Center in Washington.

About 150 to 200 plans covering 1.5 million workers and retirees could run out of money within the next 20 years. The measure would affect nearly 48,000 retired, inactive or active workers in Ohio.

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Retirement Crisis: The Great 401(k) Experiment Has Failed for Many Americans

BY KELLEY HOLLAND

You need to know this number: $18,433. That’s the median amount in a 401(k) savings account, according to a recent report by the Employee Benefit Research Institute. Almost 40 percent of employees have less than $10,000, even as the proportion of companies offering alternatives like defined benefit pensions continues to drop.

Older workers do tend to have more savings. At Vanguard, for example, the median for savers aged 55 to 64 in 2013 was $76,381. But even at that level, millions of workers nearing retirement are on track to leave the workforce with savings that do not even approach what they will need for health care, let alone daily living. Not surprisingly, retirement is now Americans’ top financial worry, according to a recent Gallup poll.

To be sure, tax-advantaged 401(k) plans have provided a means for millions of retirement savers to build a nest egg. More than three-quarters of employers use such defined contribution plans as the main retirement income plan option for employees, and the vast majority of them offer matching contribution programs, which further enhance employees’ ability to accumulate wealth.

But shifting the responsibility for growing retirement income from employers to individuals has proved problematic for many American workers, particularly in the face of wage stagnation and a lack of investment expertise. For them, the grand 401(k) experiment has been a failure.

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The Retirement Crisis

by Yves Smith, published March 26, 2015

This interview, with Teresa Ghilarducci, who the Wall Street Journal called “the most dangerous woman in America,” discusses how and why pensions are under stress, and what can be done to fix them. While she agrees that the retirement crisis is real, she also argues that it is eminently fixable, particularly since there really is no free lunch. The alternative, of widespread poverty among the aged, also imposes costs on government and society.

Ghilarducci also points out that the biggest reason that pensions are coming up short is due to how much the managers are extracting in feed. Ghilarducci’s dangerous idea, which she discusses here, is that of lowering the Medicare age to 60. She contends that it will pull in older workers that are un or underinsured, but also generally healthier than the over 65 Medicare pool. The combination of intervening earlier for some long-term ailments, most important of all diabetes, plus getting a broader set of risks into the pool, will lower overall costs.

From the summary at INET:

The retirement crisis is anything but imaginary. According to research conducted by Professor Teresa Ghilarducci, head of the Department of Economics at the New School in New York City, only 44% of workers in the United States have access to a retirement plan at work. Except for workers with defined benefit plans, most middle class U.S. workers will not have adequate retirement income — 55% of near-retirees will only have Social Security income at age 65.

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OUR RIDICULOUS APPROACH TO RETIREMENT

By TERESA GHILARDUCCI
Published: July 21, 2012 in the New York Times

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I work on retirement policy, so friends often want to talk about their own retirement plans and prospects. While I am happy to have these conversations, my friends usually walk away feeling worse — for good reason.

Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. 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.

In my ad hoc retirement talks, I repeatedly hear about the “guy.” This is a for-profit investment adviser, often described as, “I have this guy who is pretty good, he always calls, doesn’t push me into investments.” When I ask how much the “guy” costs, or if the guy has fiduciary loyalty — to the client, not the firm — or if their investments do better than a standard low-fee benchmark, they inevitably don’t know. After hearing about their magical guy, I ask about their “number.”

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THE GREATEST RETIREMENT CRISIS IN AMERICAN HISTORY

by Edward “Ted” Siedle, Published in Forbes on March 20, 2013

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We are on the precipice of the greatest retirement crisis in the history of the world. In the decades to come, we will witness millions of elderly Americans, the Baby Boomers and others, slipping into poverty. Too frail to work, too poor to retire will become the “new normal” for many elderly Americans.

That dire prediction, which I wrote two years ago, is already coming true. Our national demographics, coupled with indisputable glaringly insufficient retirement savings and human physiology, suggest that a catastrophic outcome for at least a significant percentage of our elderly population is inevitable. With the average 401(k) balance for 65 year olds estimated at $25,000 by independent experts – $100,000 if you believe the retirement planning industry – the decades many elders will spend in forced or elected “retirement” will be grim.  (Update: In response to readers’ questions about the lower number, Teresa Ghilarducci, a professor of economics at the New School for Social Research, estimates that 75% of Americans nearing retirement in 2010 had less than $30,000 in their retirement accounts.)

Corporate America and the financial wizards behind the past three decades of so-called retirement innovations, most notably titans of the pension benefits consulting and mutual fund 401(k) industries, are down-playing just how bad things are already and how much worse they are going to get.

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THE CASE FOR A 21st CENTURY NEW DEAL – A FAIR RETIREMENT FOR PEOPLE

Meet Chris. He has worked at Caterpillar for almost 40 years as a white collar employee in IT. He is approaching retirement; his traditional pension benefit will be about $1000 per month ($12,000 per year). When he retires, Chris will pay about $560 per month for health insurance benefits for he and his wife, even with Medicare. In 1974, the Caterpillar CEO made $325,000 per year and employees retired with a good pension which included health insurance at no cost. In 2013, the Caterpillar CEO made $12 million per year and he can expect a generous retirement package with almost all benefits paid thanks to Caterpillar; in contrast, employees’ retirement benefits have been cut and health insurance premiums have been increased including paying more for drugs. Chris has other investments that will help him during his retirement, but as he said, “without them I would have to keep working until I die.

Meet Ruth. She worked at IBM for 17 years. In 2001, IBM eliminated its traditional pension plan and went completely to 401K plans. Employees with a significant amount of time in the traditional pension plan ended up losing a significant part of their retirement savings even after winning a lawsuit against IBM. Employees with less time in the traditional retirement plan received a check for a couple of hundred dollars as a settlement. In 2002, IBM CEO Lou Gerstner retired with a $190 million package, and in 2012, IBM CEO Sam Palmisano retired with $271 million package. Ruth was laid off in 2004 and has no retirement from IBM; work has been hard to come by since then due to the economy. If and when she retires, she will have a meager Social Security check monthly and her savings and insurance from her husband’s death to live on.

Meet Dennis. He retired from Delta Airlines as a pilot. When Delta declared bankruptcy and divested itself from its pension plan in 2005, it turned its pension responsibilities over to Pension Benefit Guaranty Corporation (PBGC). Dennis’ pension went from $1939 per month to $95 per month. In 2012, the Delta Airlines CEO pay package was $8.9 million.

Continue reading THE CASE FOR A 21st CENTURY NEW DEAL – A FAIR RETIREMENT FOR PEOPLE