Democracy dies in darkness, and so apparently do retirement plans. The Bezos-owned Washington Post is out with a narrative-driven piece that, sadly, is increasingly the norm in the hyper-connected, always-on environment in which we now find ourselves.
It’s an anecdotal account of six Baby Boomers nearing or in retirement and the “new American economic reality” they face because of the failures “of the systems put in place when this generation was just entering its peak earning years.”
The piece is predictably coronavirus-related, “though with no savings to worry about at least it hasn’t directly hurt them financially,” the paper coldly notes in one tone-deaf passage.
Claiming none of the six stories is an outlier, it cites an Economic Policy Institute study that finds half of American families in the 56-to-61 age bracket had less than $21,000 in retirement savings in 2016.
It leaves out that EPI is a left-leaning think tank and major advocate for shared prosperity (notice the buzzwords) which routinely criticizes the demise of the defined benefit system.
The Center for Retirement Research’s Alicia Munnell is also included without mentioning that the defined contribution critic eventually conceded the efficacy of 401ks, with income replacement rates on par with their defined benefit counterparts.
As we’ve said time and time (and time) again, the good old days of pension-plan yesteryear weren’t so pleasant, with 401k father Ted Benna and others noting the relatively low coverage rates among workers, long vesting schedules and even sexism (30 years for men, but 35 years for women) built into their structure.
Combating the hysteria of this type is exactly why we chose Andrew Biggs as our latest cover subject. He’s dedicated to deconstructing the more sensational claims the mass media routinely manufacture.
“Since 1979, the average retiree household income has risen by close to 90% above inflation, which is twice the growth of salaries for working-age households,” says Biggs, former deputy commissioner of the Social Security Administration and current scholar at the American Enterprise Institute (AEI), a conservative think tank. “So, retirees have gone from being a disproportionately poor segment of the population to a disproportionately rich segment.”
Gallup found that eight out of 10 retirees have enough money not just to survive, but to live comfortably, and in the Federal Reserve’s Survey of Household Economics and Decision-making, only 4% of retirees said they find it hard to get by.
“Poverty rates among retirees are lower than working-age households, and they’ve dropped considerably over the past 20 to 30 years,” he claims. “So, there’s no retirement crisis for today’s retirees.”
This isn’t to diminish the severity of the ongoing pandemic and its effect on retirement savings, or the number of Americans without access to an employer-based plan. We can always do better, which should be the area of focus, rather than blanket criticism with no suggestions of viable alternatives.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
