It ain't easy any more.
For a few brief shining decades, it all kinda worked.
The stool had been built, and it was fairly sturdy.
The first leg was a defined benefit plan through an employer. Not everyone had one, but there were quite a few, and they were growing. Many large companies offered very good plans that provided significant support to the employees that gave so much to make their companies successful.
The second leg was your own savings and investments. Many people made decent, middle class salaries that allowed them to develop their own portfolios. It was relatively easy for many to take 10% or so of what they made and set it aside into some kind of investment. There was some risk involved, but wise investments would pay off with supportive if not always spectacular results.
The third leg was SSI. Social Security Insurance. Every worker in our society put in a portion of their wages, and it insured that they would be taken care of with a guaranteed retirement income the rest of their lives. Because it was an INSURANCE program, some people received more in benefits than they put in. Some received less. But all were guaranteed support.
The result was that elderly poverty, once a serious problem in this country, was virtually a thing of the past. Grandma and Grandpa could lead independent, comfortable lives rather than abandoned or put in a back room of one of their younger family's homes.
But only a few decades after it was assembled, it is now all coming apart.
The defined benefit plan is becoming a thing of the past. Fewer and fewer employers offer it. As CEOs raid their company's pension trust fund for other things, they complain that they can no longer afford to provide them, that they are not actuarially sound. Is that true? In some cases, as companies down size and reduce/freeze wages, it may be true. But there is always ways to fix things and take care of people. They simply, more and more often, choose not to go that route. Eliminating and reducing pensions is a way to make their stock more appealing on Wall Street.
Public plans, for state and federal workers, are not faring much better. People employed privately see the gravy that public employees get and become jealous and angry. And rather than demand that private employers do better, they want to drag the public employees down to their level.
Investments are becoming harder to maintain. As wages stagnant and costs rise, it becomes harder and harder to save. A few decades ago GM was the largest employer, and they paid $20 or more an hour. Now Walmart is the major employer and the average wage is just a buck or two above minimum wage (if that).
401ks and SIMPLE retirement plans have replaced the defined benefit plan in many places. Employers match a certain percentage of what employees set aside, most commonly 3%. But at the level of income that most people have, even if they successfully manage to shepherd the money into retirement, it does not provide adequate support compared to the other two legs.
And I have seen through my tax accounting experience, that many individuals take out this money long before retirement. It is hard to resist when other needs and emergencies come up. Many even take it out when they know they will have to pay a high marginal tax rate on it AND a 10% penalty.
Social Security still exists but it is under siege. Conservatives and others stress constantly over it's presumed shortfall that may occur decades from now. They want to reduce it, raise the retirement age, and/or privatize it. Really? At the same time the other two legs are being cut off, you also want to wreck the one thing that is working? How sad and dangerous.
As costs rise for Seniors, particularly in drug and housing/nursing home costs, we're seriously thinking about capping or cutting what they get? As more and more of us have to rely on Social Security as our major support, we're going to whack this leg too?
We're going to raise the retirement age because people live longer? What horse crap! Those who do the hardest work for the lowest wages are often broken and/or disabled long before the advantaged class. And those are the people that will be hit the hardest by an increase in retirement age.
Social Security is vital. It must not be cut. It must be expanded. It must become the strongest leg of our stool, because like it or not, it may have to hold the weight of things virtually by itself.
Defined benefit plans are rapidly becoming a thing of the past. People will need to invest in their employer's SIMPLE plan, or for the self employed, IRAs for one leg of the stool. They will have to devise their own investments for leg two. But until wages improve, these legs will never be as healthy as they should be.
The third leg should be a healthy and generous Social Security Insurance program,, one that grows and expands as needs increase, and as the fragility of the other two legs remains. Still worried about the fiscal stability of the Social Security system?
First, stop laughing at people like Al Gore for using the term lockbox. Social Security should be strictly off limits except for the purpose it was designed for.
Second, and most importantly, SCRAP THE CAP. Do not cap wages and income subject to Social Security at $118,000 or so as it is now. Let it go to the sky. Trust me. The wealthy can handle it, and it provides them and us with a lot more stable society. Seniors with money are Seniors who spend more. Spending more increases demand and boosts the economy, Boosting the economy creates more jobs. More jobs creates more people contributing to social Security. It's a win...win...win and win.
Secure the stool.
Scrap the cap!
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