What Do You Call a Stool With Two Legs?
October 30th 02:56:55 PM
Unfortunately, there is no punchline here. The traditional, three-legged approach to retirement wealth--savings, Social Security, and pensions--has lost a leg. In an article that is supposed to counter conventional wisdom, MarketWatch claims that Americans are saving more than people realize. This line of thinking suggests that we should not be concerned with low (or negative) savings because the the savings rate is not an accurate determination of consumer habits. As MarketWatch puts it, "We're better savers than numbers show."
Where, one wonders, is all of this savings? As it turns out, MarketWatch has the answer: in pension plans. "Most Americans would hardly be saving at all if not for their workplace retirement plan," the article explains. In fact, when the savings rate number is adjusted for pension savings, "That number becomes zero."
Wow, what great savers we are!
MarketWatch does have a point about putting away more money than the savings rate suggests, though. When the savings rate is negative, as it was in 2005, a savings of zero is actually better than the numbers show.
We should note for those of you playing at home that whether you have negative money or zero money, you will not be allowed to compete in Final Jeopardy. You'll be asked, instead, to go home and think about whether you were in fact a better player than the numbers showed.
Posted by Ryan Lynch
Comments
regardless if we're saving on our own or not, the fact remains we are forced to pay taxes into a system that is screwing us over! so now, not only do i have LESS $$ to be saving from my paycheck (after all the freakin taxes are taken out!) but the very system that is supposed to be providing my benefits when i retire is FAILING! PLEASE DO SOMETHING ABOUT THAT CONGRESS!!
Posted by evan on October 30th 03:20:06 PM
Well, it's not just what you see on the surface that's the problem.
Look around at the pension plans of this country. They're falling like flies. (See GM, Ford, the airlines, etc)
The only certainty that you can count on for retirement is the money YOU have put back for YOURSELF.
Posted by Jeremy on October 30th 05:01:55 PM
This past week, Congres was sent the details on the necessary updates to the nearly 20-year-old totalization agreement with Sweden (totalization agreements reconcile the workings of two nations' Social Security systems, to ensure fair treatment of those who work part of their careers in each country.)
The reasons the agreement with Sweden needed to be updated are various, but what's notable is that even socialist Sweden now has personal accounts, whereas we do not. A quote from the report to Congress:
"When the original agreement was concluded, Sweden had a two-tier Social Security system that consisted of an earnings-related, defined-benefit program and a residence-based, flat-rate benefit program. Recent Swedish legislation restructured the system. People born after 1953 are now covered by a program consisting of three components. It includes an earnings-related, defined-contribution benefit program administered by the government, a program of individual investment accounts, and a guaranteed minimum pension payable if income-based pensions and certain other income fall below specified levels. People born before 1938 remain covered entirely under the old system, while those born between 1938 and 1953 are covered partially under the old system and partially under the new system according to a sliding scale that varies with the person's year of birth."
Posted by Feverishb on October 31st 06:37:55 AM
Proof that we can allow personal accounts without removing the safety net.
Posted by Ryan on October 31st 10:48:55 AM
That's really interesting.
Feverishb, if you have a link to any more writeups on the Swedish system, could you shoot me an email at jeremy AT secureourfuture.org?
Posted by Jeremy on October 31st 05:30:16 PM
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