A Nation of Paupers

On the one hand, some folks are doing really well these days: “The number of U.S. households with a net worth of $1 million or more -- excluding wealth derived from a primary residence -- grew 16 percent last year, according to a new report by the Spectrem Group, a Chicago-based consulting firm. After a 27 percent decline in the number of millionaire households in 2008, the ranks of U.S. millionaires swelled to 7.8 million last year [it was 9.2 million in 2007, by the way]… And it was an even better year to be an ‘Ultra High Net Worth Individual,’ defined as someone with a net worth of $5 million or more. That population grew 17 percent in 2009 to 980,000.” Huffingtonpost.com (March 9^th). On the other hand, most of us aren’t.

The crash of 2008 took down a lot of companies and even more pension plans. The government stepped in on numerous occasions in the last two years to bailout failed pension plans insured under the fed’s ERISA statute, but almost always at a level that left impacted retirees at substantially less than their vested benefits. Those with private pension plans were hit even harder as 401(k) and IRA plans sank under a pile of failed investments and paltry interest returns on bonds, savings accounts and certificates of deposit… where total default was averted. While government retirees tend to have pretty generous plans, usually defined benefit plans (where you get a predetermined payout – often with a COL increase – regardless of the performance of the pension portfolio), most folks with retirement savings at all simply count on social security plus what they have been able to put away in one account or another. Most of us not fortunate to have a powerful union or a generous government have, at best, defined contribution plans that yield… whatever they yield at the time of retirement.

And there’s the problem. Many folks were counting on the “savings in their homes” to fund retirement, but today, so many homes are underwater (below their mortgage obligations) that this trusted source of retirement funding has all but vaporized for most. And what’s even worse, according to CNNMoney.com (March 9^th): “The percentage of American workers with virtually no retirement savings grew for the third straight year, according to a survey released [March 9^th]… The percentage of workers who said they have less than $10,000 in savings grew to 43% in 2010, from 39% in 2009, according to the Employee Benefit Research Institute's annual Retirement Confidence Survey. That excludes the value of primary homes and defined-benefit pension plans [and you know those have value for a very few]… Workers who said they had less than $1,000 jumped to 27%, from 20% in 2009. Confidence in ability to save enough for a comfortable retirement hovered at 16% of respondents, the second lowest point in the 20-year history of the survey… The percentage of workers who said they have saved for retirement fell to 69%, from 75% in 2009.”

So there you have America’s recipe for disaster. Old folks with medical problems unable to retire, clinging to jobs that younger workers want… or falling off the financial cliff into a world of poverty they never imagined. Sustained pain (and deferred retirement) seems to be the lot of those lucky enough to be older workers… extreme sustained pain is what has happened to older workers laid off in this economy who are unlikely ever to work at a meaningful job ever again. With Medicare costs rising, Social Security checks are becoming less and less able to cover the cost of even the most modest retirement. With this economy lingering on “bad” for the next few years, conditions for most retirees can only get worse.

The government can reduce or eliminate taxation on monies locked into retirement accounts, at least within specified limits, to alleviate some of this difficult problem. They can eliminate the doughnut hole in prescription benefits for the elderly. I don’t see younger workers accepting horrific tax increases to pay for the old folks and reduce their own standard of living. But in the end, families just may have to learn how to support each other… just like in the old days… and most folks might just find that they will retire directly to their casket. Ouch! Golden years turned to coal.

I’m Peter Dekom, and I’m looking into a mirror.