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A more secure retirement requires a balanced approach to shoring up Social Security and effective savings plans
Published on Wednesday, Aug 27, 2008
In the latest installment in a series about the middle class, David Giffels and David Knox delved deeply into the realities. What the two Beacon Journal reporters found is a stool tilting precariously, although not in the direction many in the middle class have been led to believe by the Bush administration, which unsuccessfully pushed for a partial privatization of Social Security in 2005.
The more disturbing trend the reporters found was the erosion of company pensions. Since 1980, the number of workers with fixed retirement benefits has declined by about one-third. At the same time, 401(k)-type savings plans have increased rapidly, with some employers offering to match a percentage of an employee's contributions.
Still, such plans are vulnerable to market fluctuations that can hit just as retirement-age arrives. As it is, more than half of all workers have no retirement plan of any sort to which their employer contributes. Also troublesome is that the nation's personal savings rate in recent years has been at zero or below.
The depth of change sweeping the country was fleshed out by Giffels' account of the Kelewae family of Massillon, three generations facing rising degrees of uncertainty about once-bedrock expectations of job stability and company-paid benefits.
To be sure, the work force in this region often experienced cycles of ups and downs. What the series made plain is that what's going on now represents a permanent, fundamental alteration of long-standing patterns.
In that context, the fixes necessary to keep Social Security paying 100 percent of promised benefits must take a high priority. Even with no changes, Knox found, the system would pay full benefits until 2041, decreasing to 78 percent. In short, the system is strong enough to pay for most of the retirement of the baby-boom generation.
Shoring up the program is best accomplished with a balanced approach, the mix including small reductions in benefits for future retirees, raising the payroll tax and raising the limit on payroll amounts subject to taxation. Relatively modest changes, made now, would restore confidence.
Personal savings must be encouraged. So, too, must public investments to rebuild and retool an education system that equips workers for a rapidly changing, knowledge-based economy. Not everyone needs to go to college. Yet Ohio lags behind the national average in the percentage of its adult population with a college degree, making the state less attractive to high-tech employers.
Sadly, the Bush administration's hype about Social Security was not only misleading but also a distraction from the job of investing in the future.
Get the full article here.
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