Counterparties: America attempts to retire

By Peter Rudegeair
July 12, 2012

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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:

Congress wants another try at asking a banker tough questions, this time with Bob Diamond – Guardian

All 40 of JPMorgan’s in-house regulators were replaced last year with less experienced peers – DealBook

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

EU Mess
Spanish PM announces tax increases and budget cuts, and predicts zero economic growth amid protests – WSJ

One-stop shopping: Private equity pulls a Wal-Mart and dictates prices to suppliers – DealBook

Bold Rationality
Forcing young people to work for the government at minimum wage for 18 months may not be the best idea – Bloomberg View

Markets Have A Message
US Treasury sells 10-year debt at lowest yield ever – FT

The Fed
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

Soviet Russia: bad at economic planning, good at economic infographics – Ripetungi

Weekly initial unemployment claims decline to 350,000 due to onetime factors – Calculated Risk

Pigs in Mud
Lawyers demand ex-Dewey lawyers give back pay or “face years of litigation” – WSJ

Must Watch
Joe Weisenthal interviews Paul Krugman and shows CNBC how it’s done – Business Insider (Part I, Part II, Part III)

Bad News
The connection between rising black unemployment and the shrinking public sector – Dave Weigel


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