NY Times' Joe Nocera: My So-Called Retirement

OK, he calls it "My Faith-Based Retirement" but it's the same thing.

Joe Nocera is a financial writer for the New York Times; his beat is generally Wall Street. This time his beat is his own back yard — his personal own back yard. Meaning his non-existent personal retirement.

He speaks for many. Nocera, in an essay I find compelling, and yes, personal, writes (my emphasis and some reparagraphing everywhere):

My 60th birthday is less than a week and a half away ... [but] I’m not planning to retire. More accurately, I can’t retire. My 401(k) plan, which was supposed to take care of my retirement, is in tatters.

"I can't retire." Stark, but true of so many. We think of this as a "401(k)" problem, but it's not. It's a "Reagan-era death of pensions" problem.

In the Reagan 80s, corporations began moving their employees away from defined benefit plans (in which the money in was variable, but the money out was guaranteed) — into defined contribution plans (in which the money in was defined, but the money out could be almost zero).

Here's what that looked like on the ground for one writer [written in 2009]:

The History of the Pension

For generations, pensions were the retirement plan standard for just about every employer. This may be hard to believe, but it wasn’t until the early 1980′s [actually the late 1970s] that 401(k)’s even existed. Ironically, 401(k)’s were originally added to the IRS code as a way for companies to offer additional retirement benefits to high ranking executives, above and beyond their defined pensions. This didn’t last long.

Over time, most employers have made the shift from defined benefit pensions to 401(k)’s. 401(k)’s were sold as the fresh new thing, giving employees all of the power to choose their own investments. In reality, they were often times a low to modest cost savings over their defined benefit counterparts. The combination of the appeal to the American individualistic ambition and cost cutting possibilities were the perfect storm to sell 401(k)’s over their elder relative.

A Pension Story that Hits Home

My father retires on May 1st. He put in 36 years with the State of Michigan. At one point in the early 90′s, the State offered him a 401(k) cash exchange for the existing value of his defined benefit pension. He turned it down. It was the wisest decision he ever made.

In May, he will begin to receive over $3,000 per month in pension benefits above and beyond his living expenses. And this doesn’t even include Social Security, or the 401(k) that he started from scratch! He’s set for life and has the security in knowing that his pension benefits are safe and guaranteed.

Could he have had a bigger payout if he switched? Maybe, but most likely not. The stock market hasn’t advanced in the last 12 years[.]

And here's what that looked like for young Joe Nocera:

Like millions of other aging baby boomers, I first began putting money into a tax-deferred retirement account a few years after they were legislated into existence in the late 1970s. The great bull market, which began in 1982, was just gearing up. As a young journalist, I couldn’t afford to invest a lot of money, but my account grew as the market rose, and the bull market gave me an inflated sense of my investing skills.

I became such an enthusiast of the new investing culture that I wrote my first book, in the mid-1990s, about what I called “the democratization of money.” It was only right, I argued, that the little guy have the same access to the markets as the wealthy. In the book, I didn’t make much of the decline of pensions.

A great many companies effectively froze out their pension programs by not offering it to new employees, and by moving existing employees into the sparkling "individualistic" 401(k). The benefit to corporations was obvious — to corporations. The looming disaster may have been as well, but hey ... money is the bottom line.

And millions like Nocera are in real trouble. Here's Nocera's version of that hell:

The bull market ended with the bursting of that bubble in 2000. My tech-laden portfolio was cut in half. A half-dozen years later, I got divorced, cutting my 401(k) in half again. A few years after that, I bought a house that needed some costly renovations. Since my retirement account was now hopelessly inadequate for actual retirement, I reasoned that I might as well get some use out of the money while I could. So I threw another chunk of my 401(k) at the renovation. That’s where I stand today.

Most of his generation will experience worse than he's going through. He gives the numbers:

I’m the rule, not the exception. ... [O]nly 22 percent of workers 55 or older have more than $250,000 put away for retirement. Stunningly, 60 percent of workers in that same age bracket have less than $100,000 in a retirement account. ... [T]he average savings for someone near retirement in America right now is $100,000.

Like Nocera, most of that generation will have to work until they die. Unlike Nocera, that work will be (a) work they hate, and (b) work that their bodies may not be able to tolerate. Joe works in a chair and writes, which he loves.

Imagine being 70 on your feet all day, selling fries and making change.

The good news? I'm sure something will be done. After all, this time the damaged aren't Them (the Other), but Us (the Deserving). The shape of that fix, though, is tough to visualize; and I sure hope it doesn't take forever, doesn't take too much suffering to motivate a solution.

Thanks, Joe, for sharing. These admissions are really tough.

GP

(To follow on Twitter or to send links: @Gaius_Publius) Read the rest of this post...

Retired Americans turn to subletting houses and boats

But wait, I thought they were supposed to be giving loans to their kids so the kids could take risks, no? Isn't that with Romney said they should do? After taking a thrashing during the last few recessions retired Americans are hardly in any financial condition to throw money around the way Romney has suggested. CNBC:

The two enterprising couples are part of an emerging wave of retired “micropreneurs,” who pay for some of their living expenses by renting, sharing or swapping their big-ticket assets, such as homes, cars, airplanes and boats. New online companies are making it easier, safer and more efficient for you to become a tiny rental agency. Both couples attract at least a third of their guests through Airbnb, a San Francisco-based global online marketplace for privately owned homes and rooms. Its online rivals include Roomorama and Vacation Rentals by Owner. For autos, online car-sharing services like Relay Rides enable you to make money by renting your underused vehicles. If you have a boat or a private plane that you are willing to share, ShareZen offers you software and online assistance.

The idea of the "sharing economy" is a great thing in my opinion as it helps eliminate waste and helps generate money for many people, but there's still a large delta between the sharing economy and the Mitt Romney world, where everyone around you is dripping in money and making $10,000 bets and building elevators for their fleet of cars. Read the rest of this post...

Is 80 the new 65 for Americans? It may have to be.

This is pathetic. There's no reason why Americans should have to work until they're 80 years old, just so we can prop up the 1% who always seem to benefit. It would be nice if one party actually cared enough to make it their mission to bring back the middle class.

One of the striking results of the survey released Wednesday is that 25 percent of the respondents said they'll need to work until at least age 80 because they will not have enough money to retire comfortably.

Even those who plan on retiring expect they may continue working in some capacity and for various reasons:

- About 75 percent said they expect to work in their retirement years;
- About 39 percent said they will need to work to afford things they want or to maintain their lifestyle; and
- Another 35 percent say they'll work because they want to.

Read the rest of this post...

Americans for Prosperity Oregon—Wisconsin comes to the Pacific Northwest

This is one ad in a series being run by Americans for Prosperity Oregon. There are others that feature whiter faces, but this one jumped out at me — "Secret Lifestyles of the Rich and Government Retired":



"Look at her smile," he says. How does he hate thee? Let me count the ways.

This is Wisconsin come to the great Northwest. There appears to be a move afoot to dismantle Oregon PERS, the Public Employee Retirement System. Looks like the Koch Brothers–funded Americans for Prosperity is all over it. Welcome to the battle in the states, all of them.

By the way, in case the Envy Button hasn't been pushed hard enough, there's this from one of the probably-coordinated web-commenters on the periphery of this campaign. It's pretty typical of the hard-right comment on this local issue.

But here is the kicker. While employees of the private businesses may be at risk with regard to their pensions during an economic downturn, the government employees are not. In the private sector employees have only a contractual right to the benefits earned up to the date that the benefit package is amended. Not so for Oregon’s public employees. ...

So for those of you worried about whether you will have a pension when you reach the age of retirement, or are worried that your current pension cannot be paid, please do not add to your worries that your favorite public employee will suffer a comparable indignity. In fact, rest assured that if worse comes to worse your taxes will be increased to make sure that the public employees will be just fine. ... What else would you expect in a one-party state whose elections are funded in large part by the public employee unions?

A "one-party state"? Last I checked, eastern Oregon was Idaho come to Judgement in the legislature.

For documentation purposes, the link for the above quote is here. But there's no law says you have to give him traffic.

GP Read the rest of this post...

Galbraith: 'Actually, the retirement age is too high'

It's about time someone made the common sense argument, that if you want more jobs for the young, you want increased retirement of older workers. James K. Galbraith makes just that point in an interesting article, collectively written, called "Unconventional Wisdom" in the magazine Foreign Policy (h/t digby):

The most dangerous conventional wisdom in the world today is the idea that with an older population, people must work longer and retire with less.

This idea is being used to rationalize cuts in old-age benefits in numerous advanced countries -- most recently in France, and soon in the United States. The cuts are disguised as increases in the minimum retirement age or as increases in the age at which full pensions will be paid.

Such cuts have a perversely powerful logic: "We" are living longer. There are fewer workers to support each elderly person. Therefore "we" should work longer. ...

In the United States, the financial crisis has left the country with 11 million fewer jobs than Americans need now. No matter how aggressive the policy, we are not going to find 11 million new jobs soon. So common sense suggests we should make some decisions about who should have the first crack: older people, who have already worked three or four decades at hard jobs? Or younger people ... The answer is obvious.

Galbraith also addresses the false argument of the the aging populaton:

"[W]e" are not living longer. Wealthier elderly are; the non-wealthy not so much. Raising the retirement age cuts benefits for those who can't wait to retire and who often won't live long. Meanwhile, richer people with soft jobs work on: For them, it's an easy call.

It's all very sensible — unless your goal is to punish the under-privileged elderly. But that would only be true in a society that rewards the over-privileged elderly; oops.

GP Read the rest of this post...

French Senate confirms pension reform bill

This ought to go over like a lead balloon. BBC:

The French Senate has passed a controversial pension reform bill, which has caused a series of strikes and protests around France.

The senators approved President Nicolas Sarkozy's plan to raise the retirement age from 60 to 62, and it could become law as early as next week.

Mr Sarkozy says the measure is necessary to reduce the deficit.

Read the rest of this post...

France braces for sixth day of national strikes

Both sides continue to dig in, with the government preparing to make the final vote later this week on pension reform. Drivers have been concerned over stories of fuel shortages though the government has insisted supplies are fine. BBC News:

Tuesday will be France's sixth national day of protests since early September with further disruption expected to air travel, trains and schools.

Half of flights in and out of Paris's Orly airport have been cancelled and 30% of flights at other airports have been affected.

One opinion poll on Monday suggested that 71% of those surveyed supported the strikers, despite the increasing effect on people's lives.

Oil refineries have been shut for a week, hundreds of petrol stations have run dry and a further day of national strikes is under way.

Read the rest of this post...

Pension reform strikes continue in France as airports close to running out of fuel

Supposedly nobody should panic about the lack of fuel though. Why isn't clear, but nobody should worry about it. Maybe the new-fangled airplanes don't really need fuel but run on happy thoughts. BBC:

France is bracing itself for further mass protests over the government's plan to raise the retirement age.

Thousands of students are expected to join a fifth day of demonstrations in less than six weeks. Unions have called for more than 200 marches nationwide.

Strikes have shut most of France's oil refineries and depots and the fuel pipeline to Paris's main airports has been closed.

Read the rest of this post...

401K plans will require cost disclosure details by 2012

This is long overdue but still highly appreciated.

Employer-sponsored 401(k) retirement plans will have to disclose fees that savers pay on investments and transactions by 2012, the U.S. Department of Labor said.

“Participants will be able to understand the dramatic effect fees play in the returns that they get,” Assistant Secretary of Labor Phyllis Borzi said in a conference call today.

The regulations, which will apply to the plans by Jan. 1, 2012, will require companies to provide investors information on administrative and investment fees charged to their accounts in their quarterly statements, the Labor Department said.

Read the rest of this post...

French anti-pension reform strike rolls into third day

The strikes continue to disrupt transportation as they push back against the unpopular reforms. In Paris the travelers are aware of the strike but it is nowhere near the complete shutdown of the system in the mid-90s. For commuters getting in and out of Paris, I understand that is a much bigger problem due to fewer trains running. The strike could continue for days or even weeks due to the extremely high public support for the strike. CNN:

A strike to protest government pension reforms is set to extend into a third day Thursday.

On Wednesday, more than 1 million people walked out to protest the reforms -- and at least some of them will stay off the job on Thursday.

French workers are fighting government plans to raise the retirement age from 60 to 62.

Ten out of 12 French oil refineries were hit by the strikes Wednesday, with eight of them fully or partially stopped, according to the French Union of Petroleum Industries.

About half of Paris Metro workers were on strike, and will stay off the job Thursday, a Metro-transport union spokesman said.

Read the rest of this post...

Over 1.5 million hit the streets in France

Neither side is backing down for the moment though the protests yesterday appeared to be much larger than earlier this month. There is little doubt that the pension reform will be finalized though for many, this is much more about deterring Sarkozy from running for reelection in 2012. BBC:

French unions have staged their biggest strikes and demonstrations so far in opposition to the government's pension reform plans.

Unions put the national turnout on the third day of protests this month at 3.5m, while police said 1.2m people were involved.

The cabinet wants to raise the minimum retirement age from 60 to 62, and from 65 to 67 for a full state pension.

Some unions say they might extend or continue the strikes.

On Tuesday evening, strikers in the RATP Paris transport network voted to renew their action.

Read the rest of this post...

US city pension funds seeking nearly $600 billion

Especially in this economy, closing this gap is not going to be easy. The scariest part is that the money will run out in the next few years for at least one major city.

Big US cities could be squeezed by unfunded public pensions as they and counties face a $574 billion funding gap, a study to be released on Tuesday shows.

The gap at the municipal level would be in addition to $3,000 billion in unfunded liabilities already estimated for state-run pensions, according to research from the Kellogg School of Management at Northwestern University and the University of Rochester.

“What is yet to be seen is how this burden will be distributed between state and local governments and whether the federal government will be called upon for bail-outs,” said Joshua Rauh of the Kellogg School.

Read the rest of this post...

French unions march against pension reform for third time this month

It's still difficult to tell what the outcome will be on this issue. On the one hand, the unions appear to be splintering, with many not joining the strike today. On the other, voters strongly support the actions against pension reform. If the unions manage to reunite, the strike could turn into an extended action and shut down transportation. BBC:

French unions are staging a national day of strikes and demonstrations in opposition to the government's pension reforms - the third in a month.

Ministers want to raise the minimum retirement age from 60 to 62, and the state pension age from 65 to 67.

The civil aviation authority says up to half of flights to and from France have been cancelled because of walkouts.

Meanwhile, public transport and energy sector workers are set to vote on whether to begin open-ended strikes.

The rolling strikes would be organised by serving notice of 24-hour stoppages and renewed each day before they expired. Members of the union would need to be balloted at the end of the strike day on Tuesday.

Read the rest of this post...

French march against retirement age reform

The issue for the strike yesterday and the strike earlier this month has been over the decision to raise the retirement age from 60 to 62. As an outsider, the increase sounds quite small as many other countries only allow official retirement at 65 or 67. Where is does sound unfair is the rapid transition from the current age requirement. As I've mentioned before, there are countless marches in Paris and even though yesterday's march was large, it's doubtful that it was large enough to have any impact on the Senate confirmation.

French unions have reported turnout of nearly three million people at rallies against pension reform but police figures are much lower.

The CFDT federation said 2.9 million had joined events across France, exceeding the turnout of 2.5 million on 7 September.

Police put turnout in Paris at less than a quarter of the unions' figure.

Marches and rallies were held as strikes closed down much of the country's public transport.

The pension reform bill, which raises the retirement age from 60 to 62, has already been passed by France's lower house of parliament.

It will be debated from 5 October by the upper house, the Senate, where it is expected to pass comfortably.

Read the rest of this post...

Retirement is for losers

Appeasement is what it's all about. The Republicans always like talking about the Democrats appeasing but of course, Neville Chamberlain was a Conservative. Not that facts should matter.

How is it again that the GOP can accept the cost of endless wars but it's fair to ask granny to work at Wal-Mart? What a proud nation the Republicans like to promote. God I admire them as well as the Democrats who play their game. Read the rest of this post...

Losing $14.9 Trillion in retirement wasn't enough - Wall Street wants more

The Senate Finance Committee really needs to put back in the language that would force Wall Street to list their fees for maintaining your 401K. It's not a flashy issue because who really likes thinking about a retirement plan that is years away, but it's very important. Again, a 1% change in fees could cut 28% out of your lifetime savings! Wow! Those in the House who pushed for this plan delivered pies to the Senate Finance Committee to show the massive chunk this takes out of the retirement plans of Americans. When is enough enough for Wall Street and when will some Democrats like Max Baucus start to side with the American public who has been hammered by Wall Street? Read the rest of this post...

BP sued by pension fund for falling value due to Gulf disaster

I hear these lawsuits can be expensive. And damaging. And they might even trigger additional lawsuits. Oh dear. Investors really don't like to see waves of legal actions when they're trying to make money.

A UK pension fund alleges that it lost money because of falls in the BP share price after a pipeline leak in the Prudhoe Bay field four years ago. Lawyers for the fund say the latest spill is providing further ammunition for its case.

"It is too soon to tell exactly what went wrong in the gulf, but what is clear is that they [the accidents] both reflect a corporate culture and series of operating procedures that need to be reformed," said Thomas Dubbs, a partner at New York law firm Labaton Sucharow, which is handling the case against BP for the Lothian pension fund, claiming tens of millions of dollars. The fund, an investor in BP, looks after the retirement benefits of 67,000 workers employed by councils in Edinburgh and the Midlothian area, and also by the local bus company.

The pension providers are taking the company to court for the stock market losses attached to pipeline fractures that resulted in 200,000 gallons of oil being spilled and the Prudhoe Bay field being temporarily shut down. Accidents in March and August 2006 knocked billions off the BP share price, and Lothian is arguing that its funds have paid the price for management ineptitude.

Read the rest of this post...

British Conservatives launch first attack on safety net

If only this was so similar to what the new Work and Pensions secretary said yesterday. Sounds like the new Con-Lib coalition is stuffing the cabinet the same way Bush did. In this case, the secretary is obviously against any social safety net that might somehow benefit those in need. So do platinum parachutes count too? Here comes the nasty side that we've all been waiting for.

Britain's welfare system is "bust", with such penal disincentives to work that many people on benefits regard those who take up job offers as "bloody morons", Iain Duncan Smith, the new work and pensions secretary, says in a Guardian interview setting out the most ambitious welfare reform plans for a decade.

Duncan Smith says he is to propose to the Treasury a radical scheme that includes simplification of the complex benefits system designed to make it financially worthwhile for unemployed people to work, including in part-time jobs.

He claims that at present it is not worth going from the dole into work if the job pays £15,000 or less. He also suggests that it is an imperative that the state retirement age rises because of growing life expectancy. The coalition agreement published last week said the state retirement age should rise to 66, although it added that this would not happen before 2016 for men and 2020 for women.

Read the rest of this post...

Please welcome our good friend Naomi Seligman, who joins us today as a new writer on AMERICAblog

Joe, Chris and I have been wanting to slowly expand the blog, which is why we launched AMERICAblog Gay this past summer, and it's why we're always on the look-out for new talent. Today we welcome our good friend Naomi Seligman as a new writer on AMERICAblog.

Some of you may not have heard of Naomi, but you'll know her last place of work, where she was the number 2 in the office for the last several years - ethics watchdog CREW (and she was at Media Matters before that). Naomi recently moved from DC to the west coast, somewhere on the beach near LA (Santa Monica, I think). The point is, her move to the left coast has freed her up to finally accept our longstanding offer to write on the blog.

Naomi will be writing about whatever issue strikes her fancy, but she's told us she has a particular interest in covering issues from a woman's angle, which we heartily welcome. You can check out Naomi's bio on Blogger.

UPDATE: Naomi's next first post will go up later. The one she wrote earlier today about Tiger and Accenture relied on an article from the Associated Press that ended up being wrong. AP had a mistake in its report, which made its way around the Internet on various news sites before it was corrected a couple weeks later. Naomi checked her sources before publishing - unfortunately she found one of the news stories that wasn't corrected. Joe and I would have done the same thing. Read the rest of this post...

Americans delaying retirement due to financial stress

It's an understandable problem for many Americans yet the response from Washington on the crisis remains a mystery. In a normally functioning system, older workers retire which opens up space for younger workers to enter. Thanks to changes by the Republicans back in the 1980s, many Americans are much more reliant on the whims of Wall Street for their financial security. Somehow both Congress and the White House thought that it was OK to talk about the Wall Street failures without actually doing anything about it. The made-for-TV moments were all great fun but wouldn't it have been nice to see someone bother to rein in the gamblers of Wall Street who pilfered other peoples money?

Now we are faced with the problem of backlog in employment when we need to inject new workers yet it will take some time. Wall Street has nicely bounced back with bonuses that are as bloated as ever though the rewards to customers are nowhere to be found. Considering how critical this issue was during the election and all of the talk about this being the worst recession since the Great Depression (the Great Recession as some call this) there remains a lack of seriousness throughout the political leadership in Washington. Tackling the tough issues was supposed to be a priority rather than an afterthought as it is today.

To the long list of reasons American companies aren’t hiring — business losses, tight credit, consumer retrenchment — add the fact that many of their older workers are unable, or afraid, to retire.

In other parts of the developed world, people are retiring as planned, because of relatively flush state and corporate pensions that await them. But here in the United States, financial security in old age rests increasingly on private savings, which have taken a beating in the last year. Prospective retirees are clinging to their jobs despite some cherished life plans.

As a result, companies are not only reluctant to create new jobs, but have fewer job openings to fill from attrition. For the 14 million Americans looking for work — a number expected to rise in Friday’s jobs report for August — this lack of turnover has made a tough job market even tougher.

Read the rest of this post...