In typical fashion another problem (maybe) is interpteted as needing more government solutions. That’s probably the last thing we need. What we do need is more responsible, more informed and more disciplined Americans who can make their future a present day priority.
… the GAO calls for a “comprehensive re-evaluation” of the nation’s public and private retirement programs “to better promote future retirement security.” Many progressives are more than willing to provide that re-write, with proposals to significantly expand Social Security and to establish retirement plans for private sector workers run by state governments. Doubtless, proponents of these policies will see the GAO report as supporting their cause.
A new report from federal the Government Accountability has generated headlines regarding the U.S. retirement system, all of them negative. But the GAO focuses on what could go wrong with retirement saving, instead of data on all the things that are going right.
Here is what the GAO actually said:
“The U.S. retirement system, and the workers and retirees it was designed to help, face major challenges. Traditional pensions have become much less common, and individuals are increasingly responsible for planning and managing their own retirement savings accounts, such as 401(k) plans. Yet research shows that many households are ill-equipped for this task and have little or no retirement savings.”
First, there is no US retirement system and except for the safety net of Social Security, there never was. In 1980 46% of workers had a defined benefit pension. That was the peak level of coverage and except for government workers has been in decline ever since. It would be nice even desirable for every American to have some annuity income in addition to Social Security. Even more desirable would be to have that on an automatic basis. But the defined benefit pension is not coming back so we need to think out of the box. One way to do that is to build annuities into 401k and other defined benefit plans, (perhaps designate the employer match or the worker basic contribution toward an annuity investment) one way not to do that is more government programs and new liabilities.
And of course, as I said already, we need more responsible, more informed and more disciplined Americans who can make their future a present day priority.
Traditional pensions are still offered by about 84% of state and local governments. How come? Simple: It’s hard for a politician to get elected, or re-elected, on a platform that vows to take away the traditional pension gravy train.
That said, given the budget challenges in many states, many public-sector pension plans do not have enough money set aside to cover all the future payouts promised to current workers. That doesn’t bode well for taxpayers in those states; short of a miraculous stock market rally that pushes all the plans into overfunded status, at some point the government is going to have to find the money to pay the retirees. And that probably will require higher taxes. Source: CNN Money.com