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I know, you want to lay your head down and nap at the thought, but bare with me. This will be an important issue in the weeks, months, and probably years ahead.
I worked at a non-profit agency for a year that deals solely in retirement benefits. Before (and, honestly, during) that time, talk of pensions, 401(k)s, and Social Security would make my eyes glaze over. But I did learn something:
Retirement income can be broken down (in a broad way) into four types:
Personal savings
Defined contribution retirement plans
Defined benefit retirement plans
Social Security
Personal savings is probably the most reliable and the most elusive. Realistically, Joe and Jane Average, who are too busy working paycheck to paycheck to notice the current economic upswing (as claimed by the administration), aren't likely to have the flexibility to put a substantial amount of money away for the long term. Especially with decreasing medical coverage and increasing medical costs, the increased tax burden on the lower classes, and the skyrocketing costs of higher education.
Defined contribution retirement plans are 401(k), 403(b), Employee Stock Ownership Programs (ESOPs), and any retirement plan that has a set contribution with no guarantee (although some good predictors) as to what the employee will have in terms of actual cash money upon retirement. Employees of Enron and Worldcom are examples of the worst case scenario when it comes to defined contribution plans. They invested all their retirement money in their companies while being lied to by the CEOs, CFOs, and other top brass. They lost everything - their jobs, their savings, their retirement security.
Defined benefit retirement plans (my personal favorite) are increasingly less common in today's environment where employees are more transient than they have been in the past. These are traditional pension plans wherein the company says of an employee works for them for X years and retires at age Y, they will receive Z dollars a month upon retiring (and the employee can choose to have a lower monthly annuity so that her spouse continues to receive monies if she outlives him). Defined benefit plans are guaranteed by the Pension Benefit Guarantee Corporation (PBGC), to which the company pays a fee to secure the plans in the event that the company goes under. The employees are still paid their retirement. Unfortunately, the PBGC has been so over-burdened by companies with defined benefit plans going out of business (steel manufacturers, most notably) that they are in serious danger, themselves, of going bankrupt.
Finally, there is Social Security. The only guaranteed plan that doesn't rely on individual-driven contribution (they take it automatically), is not subject to market fluctuations or upper-management corruption, and is the sole source of retirement income for many, many hardworking Americans who live paycheck to paycheck. It's not a windfall or a source of great, indulgent riches for anyone. But for some, it's the only income they have. Gambling with this money by putting it in the market or asking people who don't know a dividend from a prime rate is just begging to thrust the elderly into deeper poverty in the midst of an already crumbling retirement income system.
I worked at a non-profit agency for a year that deals solely in retirement benefits. Before (and, honestly, during) that time, talk of pensions, 401(k)s, and Social Security would make my eyes glaze over. But I did learn something:
Retirement income can be broken down (in a broad way) into four types:
Personal savings
Defined contribution retirement plans
Defined benefit retirement plans
Social Security
Personal savings is probably the most reliable and the most elusive. Realistically, Joe and Jane Average, who are too busy working paycheck to paycheck to notice the current economic upswing (as claimed by the administration), aren't likely to have the flexibility to put a substantial amount of money away for the long term. Especially with decreasing medical coverage and increasing medical costs, the increased tax burden on the lower classes, and the skyrocketing costs of higher education.
Defined contribution retirement plans are 401(k), 403(b), Employee Stock Ownership Programs (ESOPs), and any retirement plan that has a set contribution with no guarantee (although some good predictors) as to what the employee will have in terms of actual cash money upon retirement. Employees of Enron and Worldcom are examples of the worst case scenario when it comes to defined contribution plans. They invested all their retirement money in their companies while being lied to by the CEOs, CFOs, and other top brass. They lost everything - their jobs, their savings, their retirement security.
Defined benefit retirement plans (my personal favorite) are increasingly less common in today's environment where employees are more transient than they have been in the past. These are traditional pension plans wherein the company says of an employee works for them for X years and retires at age Y, they will receive Z dollars a month upon retiring (and the employee can choose to have a lower monthly annuity so that her spouse continues to receive monies if she outlives him). Defined benefit plans are guaranteed by the Pension Benefit Guarantee Corporation (PBGC), to which the company pays a fee to secure the plans in the event that the company goes under. The employees are still paid their retirement. Unfortunately, the PBGC has been so over-burdened by companies with defined benefit plans going out of business (steel manufacturers, most notably) that they are in serious danger, themselves, of going bankrupt.
Finally, there is Social Security. The only guaranteed plan that doesn't rely on individual-driven contribution (they take it automatically), is not subject to market fluctuations or upper-management corruption, and is the sole source of retirement income for many, many hardworking Americans who live paycheck to paycheck. It's not a windfall or a source of great, indulgent riches for anyone. But for some, it's the only income they have. Gambling with this money by putting it in the market or asking people who don't know a dividend from a prime rate is just begging to thrust the elderly into deeper poverty in the midst of an already crumbling retirement income system.
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