Are 401(k) advisors partly responsible for Donald Trump’s popularity by not doing enough to help participants prepare for retirement?
One influential economist says yes, arguing “[t]here is bitterness and resentment to the Trump movement that differs from the tone set by America’s last few Republican presidents, most of all Ronald Reagan,” and it’s all due to insufficient retirement savings.
“Older white Americans are Donald Trump’s core support group,” writes Tyler Cowen, the outspoken professor of economics at George Mason University. “ …there is a less heralded force influencing American politics: insufficient savings, most of all for older Americans. For those individuals, the prospect of falling standards of consumption – for the remainder of their lives – means the economy is worse than the GDP growth and unemployment numbers are indicating.”
He points to a statistic from The Center for Retirement Research at Boston College contained in William A. Birdthistle new book “Empire of the Fund: The Way We Save Now,” that finds those on the cusp of retirement – workers between the ages of 55 and 64 – have a median balance in household 401(k) or IRA accounts of just $111,000.
Traditionally Democratic party stalwarts, the fact that smaller 401(k) retirement accounts with no pension guarantees like those enjoyed by their parents, combined with the United States ranking 14th for retirement security in a recent survey of developed countries, are driving seniors to the right.
The issue of retirement readiness has of course been discussed for decades, but Cowen notes the “bill is coming due.”
“The savings problem thus is about the scarce virtues of temperament, patience, and discipline. American savings rates started to fall in the 1980s, and rising asset prices during that time set a problematic dynamic in motion. As homes and stock portfolios rose in value, many Americans concluded they didn’t have to lay aside much for their nest eggs. Asset markets would do their savings for them.”
It hasn’t happened, and the resulting despair results in our current political predicament, Cowen concludes.
“Trump is himself often portrayed as impetuous. It is less commonly remarked that he may be in part the result of a broader and larger impatience that has plagued American society for decades.”