Where Did the Three Legged Stool Go?
When President Roosevelt pushed for Social Security, it was meant to be only one leg of a three legged retirement security stool that also included personal savings and a pension. However, it’s now the only stool left for many workers (and Congressional Republicans are looking to take it away too). Workers in low-income jobs – those who have the least ability to save – and people of color have the least access to any sort of retirement plan.
Workers that do have access to a retirement plan at work are more likely to be enrolled in a risky 401k plan than an old-fashioned pension.
401k plans are an attempt by employers to push market and investment risks onto workers, resulting in lower living standards. A worker earning the median salary should have $250,000 in their retirement accounts as they approach 65; however, in 2007, the average balance for those with 401k plans was $98,000. Additionally, investment firms make significant profits on 401k plans through obscure fee structures further diminishing savings. A Government Accountability Office report showed that many employees do not know how much they pay in fees and that a 1% increase in those fees would cut worker savings by 17% over 20-years.
Public Pensions are the Not the Problem
• Public pensions are not generous. The average pension of an AFSCME retiree is $19,000 per year, and in many places that is in lieu of Social Security.
• Eliminating public pensions will hurt the state’s economy and increase the deficit. According to the National Institute on Retirement Security, benefits paid by state and municipal government pension plans in CT generate 18,530 jobs, $3.2 billion in economic output, and $562.8 million in tax revenues.
• Public employees pay a significant portion of the costs of their pensions, and always pay on time. They should not be punished for the failures of politicians that engaged in poor funding practices.
Principles of Retirement Security
The problem is clearly not the pension plans that currently exist, but the lack of access that most workers have to one of the most cherished elements of the American dream. Retirement USA, an initiative convened by a range of labor unions, think tanks, civil rights groups, and retiree advocacy organizations, has developed 12 principles for a new retirement system, that along with Social Security, will ensure every worker has the opportunity to retire with dignity.
• Universal Coverage
• Secure Retirement
• Adequate Income
• Shared Responsibility
• Required Contributions
• Pooled Assets
• Payouts Only at Retirement
• Lifetime Payouts
• Voluntary Savings
• Efficient and Transparent Administration
Underfunding or changing the benefits of the public employee pension plans will move the state in the wrong direction by further diminishing access to retirement security.