The Retirement Crisis

timwilliams By timwilliams, 23rd Nov 2014 | Follow this author | RSS Feed | Short URL
Posted in Wikinut>Family>Retirement

The realty of today's 401-K retirement accounts and the true state of the US economy.

The Retirement Crisis

For anyone born before 1956 there is a real eminent clear and present danger lurking in America today. As many of us baby boomers know by now the United States government is flat broke and over $17 trillion in debt. But, what makes this such an impossible hurdle to overcome is the fact that our government, yes our illustrious elected leaders of state, continued to ignore the root cause of our enormous debt while borrowing even more money. For us baby boomers who rely on Social Security our same elected leaders of state have systematically raided the Social Security trust fund for years just to garnish funds for their pet pork barrel spending. And, to make matters worse with more of our seniors retiring the government will have to borrow yet even more money just to pay out the benefits for the rest of 2014 and all of 2015. The prognosis is the fact that unless the United States increases the employment rolls with living wages, not just raising the minimum wage either, to the point that the tax revenue coming in from employees W-2 forms equates to the amount of funds needed to support the mandated expenditures that are required the government will only continue to wallow in massive debt.

This is only a small fraction of the coming crisis. With wages that have become stagnant and the number of those still unemployed while the cost of living has only succeed in rising the United States has the majority of it's citizens not earning nearly enough to fulfill the Williams Theory of Economic Evolution. When wages are at all time lows compared to the cost of living while corporate profits are going through the roof questions have to be asked.

Many of those employed today have the availability to augment their savings if they choose using their companies 401-K plans. But, in so many instances the harsh reality is the fact that today's employees don't make nearly enough to put any money into a 401-K plan let alone a bank savings account because they need all the disposable income they can get form their paycheck. When we talk about savings and part of the criteria for fulfilling the Williams Theory of Economic Evolution this is where the majority of the public are able to save 10% of their earnings each and every year. Whether it is in saving accounts, 401-K, US treasury bonds or Certificates of Deposit saving 10% of their earnings is paramount to a growing and flourishing economy.

One of the biggest factors that continue to have such an adverse effect on the economy of the US to which our national debt is tied to is the fact that our free trade agreements of the past and this new Trans Pacific Free Trade Agreement will only continue to drain employment opportunities out of the United States. From NAFTA on all these trade agreements have done, contrary to what our elected officials keep saying, is that they won't produce the employment numbers with jobs created or in wages received that would negate our over $17 trillion debt.

When we really look at the statistics it was back in 1994 when NAFTA was first in effect that the number of jobs created which was intended for the US took place instead overseas. Since then corporate profits continued their steady climb but, at the same time millions of middle-class wage earning jobs in the United States disappeared. The numbers have been staggering. Since 1994 government safety nets that are in place to assist the poor the expenditures for these programs have more than quadrupled. Now, with tax revenue still decreasing because of stagnant wages and the insufficient number of middle-class jobs being offered governmental safety net programs have only increased their expenditures. To meet these expenditures even with Republican draconian budget cuts to these programs the government debt continues to increase. At the same time these cuts have only left the health and stability of the United States in serious jeopardy.

For seniors we have seen our pension plans vanish in a blink of an eye, whatever 401-K plans we've had have become almost worthless, interest rates in our saving accounts have only inclined many to put their money, like during the Great Depression, in their mattress, and with Scrooge like acumen our Republican led legislature have purposely assaulted Social security benefits. Whatever cost of living allotment seniors receive this January for millions who depend on that Social Security as their only source of income has made it seem like the Grim Reaper of economic reality is at your front door.

Americans are no strangers to adversity. But, it seems and there is more truth in this than we know that there is a well orchestrated set of circumstances in play that is choreographed for the sole benefit and increasing profits for Corporate America and Big Oil. When we take a look at a recent Gallop poll on what priorities the electorate want our elected officials to concentrate on it really isn't surprising that our newly elected Republican led legislature have their own agenda. When Corporate funds fuel political campaigns to the extent they have the voice of the people are always drowned out.

It shouldn't come as a surprise either that profits are corporate America's main motivation. But what has taken place with individual retirement accounts like a 401-K is so deceptive and boarders on criminal to what is actually occurring with your retirement savings. Pensions for a long time was an American right of passage for years of service to a company. Now to increase their corporate profit margins "Big Business started to eliminate pension plans and your retirement benefits you expected and deserved. In place of those monthly pension checks "Big Business devised the 401-K plan. Corporations for years gambled much of their profits within the Stock Market but your retirement pension check remained stable. But, all that changed when they switched over to individual retirement accounts hence the 401-K where you, the employee contribute part of your earnings. Now, instead of the corporation investing in the Stock Market you have the choice to where to put this retirement account and gamble to increase your account.

The problem today is what corporate America won't tell, is that under pension plans of the past these giants of industry recognized there was a well founded financial risk in managing their portfolios of retirement assets through the ups and downs of the markets. Many fund managers continued to chose investments that dramatically underperformed. This only exacerbated the already existing problem of funding those monthly pension checks. And, it was the employer who was responsible for making up any shortfall. To add insult to injury these losses cut even deeper into their profits. So what to do, they devised the individual retirement account, the 401-K as a replacement for your pension plan.

Instead of a pension plan or a defined benefit plan, businesses started removing all the responsibility for funding retirement plans as well as inherent financial risks of the Stock market from their responsibility and made those responsibilities yours instead. The reality is that the 401-K plans have been a complete and utter failure. When, after all if the professional money managers of "Big Business" couldn't grow pension funds how can a novice, you the employee, possibly be expected to do any better? The rank and file employee who signed up and signs up for 401-K plans are doomed to fail.

When the markets fell in 2000 and again in 2008 with the prospect of yet again another crash looming trillions of dollars in retirement savings vanished and will again disappear. For us millions of Baby Boomers who are either about to retire or have retired already are now faced with unprecedented financial distress just when you thought your were joining the golf cart reality.


Pension Plans, The Economy Of The Us

Meet the author

author avatar timwilliams
I am a feature writer for The Tampa Bay Examiner and The American chronicle. Earned Ph.D in Economics

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author avatar Fern Mc Costigan
24th Nov 2014 (#)

Interesting post and one full of sad reality for us post baby boomers!

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