The New York Times ran a fascinating piece last week — “U.S. Seniors Prosper, Finding ‘Sweet Spot in Middle Class.” Despite all we’ve been hearing about struggling seniors having to work until they drop, it turns out that seniors aged 65-74, on average, are doing rather well, even if they’ve chosen to retire.
According to the Times, “…they are the last generation to widely enjoy a traditional pension, and are prime beneficiaries of a government safety net targeted at older Americans. They also have profited from the long rise in real estate prices that preceded the recession. As a result, more seniors now fall into the middle class — defined in this case between the 40th and 80th income percentile — than ever before.”
The Times adds “Median income for people 75 years and older has also risen, but not as much as it has for people in the 65-to-74 age group.”
The article raises important political questions. Why did Americans give up on traditional pension plans so easily? Why didn’t we demand legislation to protect our pensions?
CNN Money reports that in the 1980s, sixty per cent of workers were protected by defined benefit plans, as traditional pensions are known. Today, only ten per cent have these plans, although thirty per cent of employers are still offering a combination of traditional pensions and the 401(k) type of plan. Meanwhile, the assault on pensions continues, with employers freezing pension benefits, offering lump sum payouts, and switching workers to annuities provided by private insurers — options that are almost certain to lead to reduced incomes when it comes time to retire.
One problem is that workers have little power to resist the changes their employers force upon them. Unions are weaker than they have been for decades, and Congress is controlled by politicians who care little for worker rights.
The second problem is that 401(k) plans have a surface appeal that has tricked many into thinking they are a pretty good deal, particularly when employers offer a matching contribution. After all, workers reason, isn’t my employer putting money into an account that I control? But the reality is that few of us have the ability to manage our savings and investments so that they will stretch over twenty or thirty years of retirement. Traditional pension plans are professionally managed — so well that they continue to provide security for millions aged 65 and up. The children of that generation will never know a similar security.
It’s hard to imagine a political scenario in which the traditional pension will stage a comeback. Perhaps the best we can manage at this point is to circle the wagons and protect the remainder of the safety net — Social Security and Medicare — from politicians who would dismantle them.