Good reasons to be uneasy about retirement security
By Ezra Klein
Washington Post Staff Writer
Saturday, November 27, 2010
For anyone who would like to retire someday, reading the news can be depressing. There's the Social Security shortfall, of course, and the reports that pensions promised to state employees are terribly underfunded. The financial crisis wiped out plenty of 401(k)s, and many families had to borrow against - or withdraw from - their retirement savings to stay afloat.
Too often, these are three separate conversations, and they're frequently lashed to other issues. Social Security is usually discussed in terms of the deficit, and Washington brims with plans for cutting Social Security benefits. The conversation over state pensions usually is really about the sustainability of state budgets. And when we talk 401(k)s, we tend to be talking about volatility in the stock market.
But really, these are all the same conversation, about the same problem: retirement security. The late 20th century saw a great shift in risk, in which uncertainty that had been borne by employers and the government was shunted onto individuals. And in our efforts to solve our deficit and economic problems, we must be careful not to make our retirement problem worse.
Consider the 401(k): When Congress created the provision in 1978, lawmakers didn't realize they were going to transform the American pension system within a generation. But that's what happened. Previously, employers had defined-benefit systems in which they had to worry about saving enough to pay for the retirement of their workers; the 401(k) - and similar defined-contribution systems - let them push that responsibility onto the workers.
(More here.)
Washington Post Staff Writer
Saturday, November 27, 2010
For anyone who would like to retire someday, reading the news can be depressing. There's the Social Security shortfall, of course, and the reports that pensions promised to state employees are terribly underfunded. The financial crisis wiped out plenty of 401(k)s, and many families had to borrow against - or withdraw from - their retirement savings to stay afloat.
Too often, these are three separate conversations, and they're frequently lashed to other issues. Social Security is usually discussed in terms of the deficit, and Washington brims with plans for cutting Social Security benefits. The conversation over state pensions usually is really about the sustainability of state budgets. And when we talk 401(k)s, we tend to be talking about volatility in the stock market.
But really, these are all the same conversation, about the same problem: retirement security. The late 20th century saw a great shift in risk, in which uncertainty that had been borne by employers and the government was shunted onto individuals. And in our efforts to solve our deficit and economic problems, we must be careful not to make our retirement problem worse.
Consider the 401(k): When Congress created the provision in 1978, lawmakers didn't realize they were going to transform the American pension system within a generation. But that's what happened. Previously, employers had defined-benefit systems in which they had to worry about saving enough to pay for the retirement of their workers; the 401(k) - and similar defined-contribution systems - let them push that responsibility onto the workers.
(More here.)
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