Retirement is More Complex Than Ever—What Can We Learn From Others?

After the ensuing chaos of The Great Depression of 1929, when unregulated and high-risk stock market investments resulted in the Stock Market Crash that destroyed millions of investors and left most corporations without any income to continue paying workers, 13 to 15 million Americans were unemployed, and approximately half of the banks in America failed. In part of the reconstruction efforts, President Franklin Delano Roosevelt set about to create a remedy for American workers and in 1935 signed into law the Social Security Act. As a wage earning American citizen, it is important that you understand why Social Security is in danger of Privatization.

When workers are the last consideration in corporate spending, the result is reflected in a refusal to factor in the cost of living raises that allow people to pay into any savings plan. When managed at a Federal level, Social Security is deducted from your paycheck and paid into the master fund to cover your minimum retirement age monthly stipend.

Privatization Of Workers’ Retirement

In an ideal world, you elect representatives to conduct matters of state and government so you can continue your daily routine of holding down a job and enjoying your family. Unfortunately, humans are too easily bought and sell-out to the highest bidder. If the politicians cured the problems with Social Security, your previous investment would carry over to any future employer, but privatization ends that possibility.

For the same reasons President Roosevelt set up the SSA, these factors are ever-present and immediately threaten the livelihood of American workers. Here are the conditions that provide a means of putting you out of a job.

  • Corporate Bankruptcy – The bankruptcy laws allow for partial of full relief from debt due to mismanagement and poor planning.
  • Corporate Mergers – When companies merge, the deal seldom includes funds already paid into the retirement accounts.
  • Embezzlement – Although most businesses have some form of insurance to soften the blow of employees stealing from the retirement accounts, they are not always required to carry a policy that replaces all of the funds.
  • Political Party Majority – Unfortunately, some political parties think SS Funds are there to pay for wars, whether the war is necessary, or not. They take the money with promises to return it, and the money never reappears. Social Security is the first thing they attack in pursuit of ‘less government.
  • Cost of Inflation – Goods and services have cost increases on a yearly basis and factor these into the cost of doing business. However, employee financial needs are not part of the equation and therefore not factored into retirement.
  • Cost of Living – Large companies is to hand out small yearly raises which never meet the increase in cost to seniors for food, shelter and healthcare.

State Control

State efforts to support workers expectations of a retirement plan face difficulties in attempts to implement assistance programs and most of them failed. Some of the reasons include a lack of state revenue to support the personnel required to manage the accounts even though each state receives federal funding and inadequate methods of calculating Costs of Living increases that must provide seniors with sufficient income to pay their essential bills.

There are two basic types of state managed retirement plans that include Defined Benefits Plans and Defined Contribution Plans.

  • Defined Benefit Plans – Typically funded by employers, these plans use a formula to provide a guaranteed lifetime benefit at a specified age without any promise of specified benefit at retirement and achieve their definition regarding the accumulation of contributions for the duration of time.
  • Defined Contribution Plans – Include such as 401(k) plans and individual retirement accounts (IRAs) where workers receive tax incentives and take advantage of smaller contributions and in theory create saving habits by use of payroll systems that deduct the payment.

State efforts include experiments that include several states and a PEW study, but in most cases the states find it cost prohibitive to offer a state-funded program. Small Businesses express cost as a reason for not providing employee retirement plans, where they estimate the cost at 64%.[source]

California Secure Choice statute, enacted in 2012, says the lack of sufficient retirement savings threatens the state’s already tainted social safety net and undermines their fiscal stability and economic recovery.

Illinois Secure Choice legislative efforts reveal that the investment options they provide generate returns on individual contributions, and then convert those balances to a secure retirement without liability or debt to the state.

The ever present Congressional effort to privatize Social Security is a much more complicated set of circumstances that making the necessary adjustments to the existing Federally maintained retirement plan through the Social Security Administratio