The Loss of Pensions

As of 2006, only 13% of American workers can retire with a pension. A pension is usually calculated by a percentage of the highest base salary multiplied by the number of years of service. Pensions became more commonplace during World War II when federally-mandated wage freezes pushed unions into negotiating retirement benefits for their members.

The folks with pensions are government employees: police, firefighters, teachers, municipal, state, and federal workers. However, one goal of the radical right wing "free market" sector of the Republican Party is to privatize these services. Once privatized, there will be no pensions.

By the late 1970s, 60% of American workers had pensions.

Now major corporations refuse to offer pensions to their newer employees, in a further effort to end the benefit.

Instead 401 (k) benefits are offered, due to an amendment to the IRS code in 1978 that went into effect in 1980. The amendment allows for deposit of assets, with deferred tax consequences to the employee, by the employer with an employee contribution, if feasible. As fixed benefit pensions have declined, the number of 401 (k) benefits participants has increased. The latest number I could find was 47 million active participants. Originally devised for high salaried employees, the benefit is now offered across the board. Throughout the 2000s, employers complained that too many employees were failing to take advantage of contributing to their 401 (k) accounts. However, throughout the 2000s, middle and working wages were pretty much flat. Hence the lurching towards more and more credit.

When the market is booming, a 401 (k) offers employees investment options that can grow assets. Many 401 (k) plans are invested in mutual funds. However, as we saw in 2000, again after 2001, and currently, 401 (k) benefits can shrink precipitously, even when avoiding risky investments.

That's the reason why we should not privatize Social Security. Whereas Social Security assets at some points have earned as much as 12%, current investment rates are much lower, but still better than what we might get from a current day bank CD. Click here to see the investment rate changes.

Yesterday I was dancing down the aisle of my hometown drug store to Aretha Franklin singing "Think" over the public address system. An older woman cashier looked at me suspiciously. My friend Nicky in her very proper British accent intervened: "She's harmless."

I explained to the skeptical cashier that I needed to dance and sing to keep the anxiety under control. Then she told me her story:

"I am 70 years old," she began. "I know anxiety. I'm working two jobs because I'm taking care of my daughter who has had two strokes. What can I do? I have to take care of her. No one else will."

This shouldn't be!!! We need a safety net desperately.

Now one more thing to worry about: We must solve the impending crisis of older workers, protected by age-discrimination legislation, without the assets to retire, and how they might be precluding younger workers from making a living wage.