Counterparties: America attempts to retire
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Back in the spring of 2008, Roger Lowenstein came out with While America Aged, warning that the fragility of America’s pension plans “loom[s] as the next financial crisis”. Thanks to Lehman Brothers, his timing was a bit off. As Phillip Longman explains in a great piece in the Washington Monthly, now might be the time to start worrying:
According to a recent study by the Employee Benefits Research Institute, fully 44 percent of Baby Boomers and Gen-Xers lack the savings and pension coverage needed to meet basic retirement-age expenses, even assuming no future cuts in Social Security or Medicare, employer-provided benefits, or home prices. Most Americans approaching retirement age don’t have a 401(k) or other retirement account. Among the minority who do, the median balance in 2009 was just $69,127.
Among the litany of factors Longman cites that are coming to a head this decade: the “demographic deficit” that’s leaving the US with fewer working young people supporting more retired folks; the increase in household debt of all varieties over the last five decades; and the decline in median family net worth over the past 20 years.
There’s also the mostly undelivered promise of 401(k)s. As Jia Lynn Yang wrote recently, in 2009, 51% of Americans were “at risk” of not being able to maintain their current standard of living into retirement. That’s up from 31% in 1983. It’s looking more and more like Teresa Ghilarducci was right to argue: The 401(k) “is a failed experiment of how well individuals can save for their retirement”. Maybe it’s time to try her idea of “guaranteed retirement accounts“? – Peter Rudegeair
On to today’s links:
Romney said he left Bain Capital in 1999. Government documents said he stayed on for three more years – Boston Globe
Confidential documents support Romney’s version of events – Dan Primack
FOMC minutes: More stimulus or additional policy actions may be needed “if the economic recovery were to lose momentum” – The Fed
The US economy is “stuck in a new kind of normal, somewhere between crisis and prosperity” – NYT