Retiring Insecurity

Part of the reason there hasn't been that much attention paid to the new pension legislation [1] signed by President Bush is that it just doesn't affect that many of us. Unless you work for a large corporation or the government, fewer and fewer Americans are enrolled in pension plans, considered the "third leg" of retirement security in America. Most of us don't have any workplace retirement plan at all, according to the Christian Science Monitor [2]. The barely half of us who do are enrolled in a 401(k). The new pension law is predicted to increase that percentage, and in this era of stock markets addled by corporate scandals and deflating housing markets, that's not good news for retiring Americans.

For those of us too young to remember, Jonathan Tasini—writing last year for TomPaine.com when United Airlines became the company responsible for the largest pension default in history [3] —explained why the decline of the pension is such a tragedy for American workers: 

Remember, pensions are deferred compensation—people put off getting money in their paychecks today because of a promise that they would receive a specific amount of money (hence, the term “defined benefit”) many years later. It’s their money, not the companies’ money. The private pension was a fundamental pillar of the American middle-class dream: If you saved now, you could still have a middle-class life in retirement, and you wouldn’t have to gamble in the stock market to do so.

But because the new pension bill strengthens requirements on corporations to fully fund their pension plans, most analysts predict it will lead companies to close or freeze their plans. An opponent of the bill, Rep. George Miller, D-Calif., complained [4] that "... this bill not only fails to protect workers’ promised benefits, it actually puts pension plans at greater risk of being cut or dumped entirely." And what would take their place? Retirement plans like 401(k)s that shift the retirement burden to employees.

What's crazy is the diminished expectations people in my generation (I'm almost 40) have about our employers' responsibility to us during retirement. We see a job with a 401(k) plan as something to cheer. Drawing on the words of another TomPaine.com contributor, Lee Drutman [5], here's why the shift toward 401(k)-style plans should alarm us:

Over the last two decades, there has been a steady erosion of guaranteed pension benefits and a steady rise of corporations instead giving employees a 401(k) account, a few bucks to invest, and a hearty piece of advice: “Good luck. Go strike it rich.”

Problem is, it’s not so easy to strike it rich. Most people know very little about investing, and the recent wave of financial scandals has shown, it’s quite easy to get taken for a wild ride. Corporate financial reporting remains stubbornly obfuscatory, and the investment banks and mutual funds that are supposed to help individual investors get rich are riddled with conflicts of interest and, on the whole, seem far more concerned about making money off small investors than helping them to make money on their own.

The one bright spot in the bill is that it takes a huge step forward in equal rights for lesbian and gay couples. The bill extends "important financial protections to same-sex couples and other Americans who leave their retirement savings to non-spouse beneficiaries," according to the Human Rights Campaign [6], which lobbied for the provisions.