News
Retirement Security - the Forgotten Campaign Issue
While the retirement crisis grows more threatening day by day, neither of the leading presidential candidates seems very interested in this critical issue. This, despite the fact that more than 80 million baby boomers are currently ready to retire, and that an estimated one-third of these people will retire on an income that is less than 50% of what they currently earn.
The latest forecast is that 75% of Americans born after 1945 will face financial hardship in retirement. According to Bonny L. Brill, Executive Director of The Evelyn Brust Financial Research and Education Foundation, "With Social Security and Medicare in peril and traditional pension plans shifting to 401(k) plans, we are looking into the eye of something profoundly catastrophic."
In addition to fixing the enormous problems currently facing those of or near retirement age, the government needs to do more - far more - and do it quickly.
We believe that immediately following inauguration, the next president should take the lead in creating a Retiree's Bill of Rights that spells out exactly what every American will be entitled to during retirement.
The development and deployment of a federal Retiree's Bill of Rights for all employees is a key step in assuring dignified, secure retirement for all Americans.
United Nations Secretary General Ban Ki-Moon has observed that "Our views on what it means to be old are changing all the time. Where older persons were sometimes seen as a burden on society, they are now increasingly recognized as an asset that can and should be tapped."
Unfortunately, however, those at or approaching retirement age are often treated badly. The Connecticut Commission on Aging reported that "21% of mature workers (50 and over) reported they have experienced discrimination or unfair treatment in the workplace." To combat such unfair practices, the Commission "proactively pursues innovative and effective strategies that help improve older adults' quality of life."
Recently, the Connecticut-based Aetna Retirees Association has been working with U.S. Representative John B. Larson, a Democrat who represents Connecticut's 1st Congressional District, to develop a national retiree bill of rights that would clarify and protect pension and health benefits for all retirees.
A movement to protect retirees' rights is also afoot in Kansas, where current trends indicate that by 2030, the single largest segment of the population will be people older than 75.
The University of Minnesota became a pioneer in the retiree-rights movement when in 1998, the University Senate passed a resolution entitled "Faculty Retirees' Bill of Rights."
Today, there is great demand from many diverse groups for Bills of Rights that protect their special interests. The nation's retired are the largest of such groups, however, and in the greatest need of protection.
We have asked each of the presidential candidates to tell us what steps he would take to strengthen retirement security. When we receive their comments, we will post them on this web site.
Meanwhile, however, we would like to solicit your participation in the development of a draft for this Retirement Bill of Rights. Please send us your ideas, and working with our colleagues at the American Retirement Security Coalition and the American Retirement Security Coalition Political Action Committee, we will promote this new plan through aggressive educational and political action initiatives.
Everyone who contributes to the development of the plan will, of course, receive full credit for his or her efforts.
Please contact me (aec@hgk.com) with your observations, comments, and suggestions as soon as possible.
Thank you.
Arthur E. Coia
President
When the Good Pensions Go Away:
Why America Needs a New Deal for Pension and Health Care Reform
By Thomas J. Mackell, Jr., Ed.D.
Thomas Mackell's new book is all about being able to retire with dignity and security, and how we can collectively staunch the assault on our nation's retirement system.
He observes that the major contributors to today's retirement crisis include:
- Congress' creation of the 401(k) plan in 1981, an event that marked the shift of investment risk from the employer to the employee.
- 90% of Americans who join a 401(k) plan make only one asset allocation and never change it - no matter what happens in the markets.
- 54% of all participants are using their 401(k) plan to pay their monthly expenses, and that today, 401(k) plan assets are being widely used to ward off mortgage foreclosure.
- Today, the average 401(k) plan has assets of only $65,000.
- Most people have only enough savings to replace 59% of their income upon retirement.
- Financial illiteracy is pervasive at every age level, before and after retirement.
Dr. Mackell observes that "The volatility of the market is an indication that the 401(k) plan doesn't work. We will witness a tsunami in global markets once the German banks reveal how much they have invested in mortgage-backed securities. Ten years from now the American president will have to admit the need to infuse a substantial amount of money into the government supported system to prevent citizens from living under bridges."
To protect yourself from a financial meltdown upon retirement, he suggests that all Americans:
- Learn about financial products: By understanding the nuances of financial products and the ever-changing complexities of the financial markets, retirees can be more in control of their financial future.
- Review your situation frequently: Trustees of funds and individuals with 401(k) and other plans should review and monitor their investment managers frequently to keep abreast of ever-changing market conditions.
- Confront Congress: There are more than 300 million American citizens. These Americans should dictate the agenda to the 535 members of Congress.
- Be outraged: The Sarbanes-Oxley Act of 2002 was passed by our most conservative Congress and signed into law by one of the most pro-business presidents in the history of this country because of the fury of the American people over such major corporate scandals as Enron.
As Chairman of the Federal Reserve Bank of Richmond, Chairman of United Benefits and Pensions Services, Inc., and President of the Association of Benefit Administrators and editor of its newsletter, Insights, Dr. Mackell is exceptionally well qualified to address this subject. In addition to being active as an advisor and consultant in the employee benefits field, he is also a member of the Board of Directors of the Inter-American Dialog and a director of the Foundation for Fiduciary Studies. He was a White House appointee to the ERISA Advisory Council to the Secretary of Labor from 1997 through 1999.
Dr. Mackell's book is available through Amazon (www.amazon.com) or through your local bookseller.
Retirement Security is Under Assault
The financial well-being of average Americans is under assault, according to the Economic Policy Institute's Policy Memorandum #122.
Rising economic inequality and increasing economic pressure on the middle class from globalization, the decline in unionization and bad public policies are threatening the financial security of average Americans.
The average age of retirement fell dramatically from 1950 to 1970 from about 68 years of age to about 62.5 years before leveling off. With increasing unionization came shared prosperity and increasing pension coverage. Americans lived longer, but were able to retire earlier.
These golden years are disappearing, however. The conservative's "you're on your own" philosophy, has accelerated the decline of traditional pension plans, the disappearance of employee-funded healthcare, and an erosion of personal savings. Today fewer than 20% of Americans are covered by traditional pensions, and the national savings rate is at zero, or below.
With fewer financial resources, more and more of today's retirement-age individuals are remaining in the workforce. In 1985, only about 10% of those 65 or older were still working. Today the number of those past 65 and still working is 15% and rising. For many, the dream of a secure, prosperous retirement seems doomed, and more Americans face the possibility of being forced to work long after the traditional retirement age of 65.
Financial Worries about Retirement Top Americans' Economic Concerns
The economy has not delivered strong wage growth or adequate savings opportunities in recent years for average Americans, resulting in widespread economic anxiety and insecurity, says the Center for American Progress. 
One particular area of anxiety is retirement, and polling data consistently show that not having enough money for retirement is at the top of Americans' economic concerns.
Unfortunately, government and industry have done little in recent years to address Americans' insecurities about retirement. Indeed, the only governmental move ostensibly directed at those insecurities—President Bush's 2005 plan to partially privatize Social Security--failed miserably because the public perceived that such a move would actually exacerbate, not resolve, their retirement woes.
Celebrate National Employee Benefit Day April 2, 2008
The International Foundation of Employee Benefit Plans calls the holiday "a time for those responsible for employee benefit plans to acknowledge their dedication to providing quality benefits and the important role they play in their colleagues' well-being.
This year the Foundation is encouraging benefits professionals to use the day as an opportunity to educate themselves and their participants on the important role they plan in the well being of their colleagues.
National Employee Benefits Day was created in 2004 and is recognized in both the US and Canada.
Two Retirement Funds Receive $83 Million Settlement from Shell Oil
Houston, TX - Royal Dutch Shell has agreed to pay $83 million to the Pennsylvania State Employees' Retirement System and the Pennsylvania Public School Employees' Retirement System to resolve a class action suit.
The suit claims that in 2004, Shell had overstated its oil reserves, and when the overstatement was revealed, Shell shares fell more than 10% in a single day.
NYC Funds Demand Disclosures by Three Energy Companies
Several New York City pension funds have filed shareholder resolutions demanding that three energy companies reveal the actions they are taking to reduce emissions from their power plants.
The pension funds represented include The New York City Employees' Retirement System, Teachers' Retirement System of the City of New York, New York City Police Pension Fund, New York City Fire Department Pension Fund, and the New York City Board of Education Retirement System.
The energy companies are Consol Energy of Pennsylvania, El Paso Corporation of Texas, and Massey Energy Company of Virginia.
US Supreme Court Rules that Individual Employees Can Sue Over Employers' 401(k) Misconduct
The US Supreme Court has ruled that individual employees can sue their employers for mismanaging their 401(k) retirement accounts. To date, more than 50 million employees have invested nearly $3 trillion in these accounts.
In the Court's opinion, Justice John Paul Stevens recognized that the landscape of retirement investing has been reshaped since the Court's prior ruling on related issues more than 20 years ago. Justice Stevens stated that courts should interpret employee benefits law as giving individuals the right to sue over administrative problems with their accounts, rather than limiting cases to those that affected all participants in an employer's retirement plan.
Since that ruling, the use of 401(k) individual accounts and similar plans have expanded exponentially as employers moved away from traditional defined benefit plans.
"Today's decision is a huge victory for workers and retirees," said US Labor Secretary Elaine L. Chao.
401(k) Plans called "An Acknowledged Failure"
"The 401(k) system in the US has been an acknowledged failure," said Alicia Munnell, Director of the Center for Retirement at Boston College's Carroll School of Management. "It transferred all of the risks and responsibilities from the employer to the individual employee."
With Americans relying more than ever on the stock market to finance their retirement, recent declines in stock prices have many worried that they will be unable to meet their retirement security expectations.
The housing crisis has also reduced what employees are able to save, and some are being forced to tap their retirement savings to meet everyday expenses like food and gasoline.
In this economic environment many employees are being forced to extend their working years, or even to completely abandon the concept of retirement.
An earlier study conducted by Dr. Munnell and her staff estimated that one in four Baby Boomers will not be able to retire because they simply can't afford the loss in income that retirement would bring.