The Great Retirement Con

The Origins Of The Retirement Plan

Back during the Revolutionary War, the Continental Congress promised a monthly lifetime income to soldiers who fought and survived the conflict. This guaranteed income stream, called a "pension", was again offered to soldiers in the Civil War and every American war since.

Since then, similar pension promises funded from public coffers expanded to cover retirees from other branches of government. States and cities followed suit -- extending pensions to all sorts of municipal workers ranging from policemen to politicians, teachers to trash collectors.

A pension is what's referred to as a defined benefit plan. The payout promised a worker upon retirement is guaranteed up front according to a formula, typically dependent on salary size and years of employment.

Understandably, workers appreciated the security and dependability offered by pensions. So, as a means to attract skilled talent, the private sector started offering them, too. 

The first corporate pension was offered by the American Express Company in 1875. By the 1960s, half of all employees in the private sector were covered by a pension plan.

Off-loading Of Retirement Risk By Corporations

Once pensions had become commonplace, they were much less effective as an incentive to lure top talent. They started to feel like burdensome cost centers to companies.

As America's corporations grew and their veteran employees started hitting retirement age, the amount of funding required to meet current and future pension funding obligations became huge. And it kept growing. Remember, the Baby Boomer generation, the largest ever by far in US history, was just entering the workforce by the 1960s.

Companies were eager to get this expanding liability off of their backs. And the more poorly-capitalized firms started defaulting on their pensions, stiffing those who had loyally worked for them.

So, it's little surprise that the 1970s and '80s saw the introduction of personal retirement savings plans. The Individual Retirement Arrangement (IRA) was formed by the Employee Retirement Income Security Act (ERISA) in 1974. And the first 401k plan was created in 1980.

These savings vehicles are defined contribution plans. The future payout of the plan is variable (i.e., unknown today), and will be largely a function of how much of their income the worker directs into the fund over their career, as well as the market return on the fund's investments.

Touted as a revolutionary improvement for the worker, these plans promised to give the individual power over his/her own financial destiny. No longer would it be dictated by their employer.

Your company doesn't offer a pension? No worries: open an IRA and create your own personal pension fund.

Afraid your employer might mismanage your pension fund? A 401k removes that risk. You decide how your retirement money is invested.

Want to retire sooner? Just increase the percent of your annual income contributions.

All this sounded pretty good to workers. But it sounded GREAT to their employers.

Why? Because it transferred the burden of retirement funding away from the company and onto its employees. It allowed for the removal of a massive and fast-growing liability off of the corporate balance sheet, and materially improved the outlook for future earnings and cash flow.

As you would expect given this, corporate America moved swiftly over the next several decades to cap pension participation and transition to defined contribution plans.

The table below shows how vigorously pensions (green) have disappeared since the introduction of IRAs and 401ks (red):

(Source)

So, to recap: 40 years ago, a grand experiment was embarked upon. One that promised US workers: Using these new defined contribution vehicles, you'll be better off when you reach retirement age.

Which raises a simple but very important question: How have things worked out?

The Ugly Aftermath

America The Broke

Well, things haven't worked out too well.

Three decades later, what we're realizing is that this shift from dedicated-contribution pension plans to voluntary private savings was a grand experiment with no assurances. Corporations definitely benefited, as they could redeploy capital to expansion or bottom line profits. But employees? The data certainly seems to show that the experiment did not take human nature into account enough – specifically, the fact that just because people have the option to save money for later use doesn't mean that they actually will.

First off, not every American worker (by far) is offered a 401k or similar retirement plan through work. But of those that are, 21% choose not to participate (source).

As a result, 1 in 4 of those aged 45-64 and 22% of those 65+ have $0 in retirement savings (source). Forty-nine percent of American adults of all ages aren't saving anything for retirement.

In 2016, the Economic Policy Institute published an excellent chartbook titled The State Of American Retirement (for those inclined to review the full set of charts on their website, it's well worth the time). The EPI's main conclusion from their analysis is that the switchover of the US workforce from defined-benefit pension plans to self-directed retirement savings vehicles (e..g, 401Ks and IRAs) has resulted in a sizeable drop in retirement preparedness. Retirement wealth has not grown fast enough to keep pace with our aging population.

The stats illustrated by the EPI's charts are frightening on a mean, or average, level. For instance, for all workers 32-61, the average amount saved for retirement is less than $100,000. That's not much to live on in the last decades of your twilight years. And that average savings is actually lower than it was back in 2007, showing that households have still yet to fully recover the wealth lost during the Great Recession.

But mean numbers are skewed by the outliers. In this case, the multi-$million households are bringing up the average pretty dramatically, making things look better than they really are. It's when we look at the median figures that things get truly scary:

Nearly half of families have no retirement account savings at all. That makes median (50th percentile) values low for all age groups, ranging from $480 for families in their mid-30s to $17,000 for families approaching retirement in 2013. For most age groups, median account balances in 2013 were less than half their pre-recession peak and lower than at the start of the new millennium.

(Source)

The 50th percentile household aged 56-61 has only $17,000 to retire on. That's dangerously close to the Federal poverty level income for a family of two for just a single year.

Most planners advise saving enough before retirement to maintain annual living expenses at about 70-80% of what they were during one's income-earning years. Medicare out-of-pocket costs alone are expected to be between $240,000 and $430,000 over retirement for a 65-year-old couple retiring today.

The gap between retirement savings and living costs in one's later years is pretty staggering:

  • Nearly 83% of retired households have less saved than Medicare costs alone will consume.
  • One-third of retired households are entirely dependent on Social Security. On average, that's only $1,230 per month a hard income to live on. (source)
  • 34 percent of older Americans depend on credit cards to pay for basic living expenses such as mortgage payments, groceries, and utilities. (source

As for Medicare, the out-of-pocket costs could easily soar over retirement. The Wall Street Journal reports that the current estimate of Medicare's unfunded liability now tops $42 Trillion. Such a mind-boggling gap makes it highly likely that current retirees will not receive all of the entitlements they are being promised.

And the denial being shown by baby boomers entering retirement is frightening. Many simply plan to work longer before retiring, with a growing percentage saying they plan to work "forever". 

But the data shows that declining health gives older Americans no choice but to leave the work force eventually, whether they want to or not. Years of surveys by the Employment Benefit Research Institute show that fully half of current retirees had to leave the work force sooner than desired due to health problems, disability, or layoffs.

Add to this the nefarious impact of the Federal Reserve's prolonged 0% interest rate policy, which has made it extremely hard for retirees with fixed-income investments to generate a meaningful income from them.

The number of Americans aged 65 years and older is projected to more than double in the next 40 years:

Will the remaining body of active workers be able to support this tsunami of underfunded seniors? Don't bet on it.

Especially since their retirement savings prospects are even more dim. With long-stagnant real wages and punishing price inflation in the cost of living, Generation X and Millennials are hard-pressed to put money away for their twilight years:

(Source)

Public Pensions: Broken Promises

And for those "lucky" folks expecting to enjoy a public pension, there's a lot of uncertainty as to whether they're going to receive all they've been promised.

Due to underfunded contributions, years of portfolio under-performance due to the Federal Reserve's 0% interest rate policy, poor fund management, and other reasons, many of the federal and state pensions are woefully under-captialized. The below chart from former Dallas Fed advisor Danielle DiMartino-Booth shows how the total sum of unfunded public pension obligations exploded from $292 billion in 2007 to $1.9 trillion by the end of 2016:

(Source)

And the daily headlines of failing state and local pension funds (Illinois, Kentucky, New JerseyDallas, Providence -- to name but a few) show that the problem is metastasizing across the nation at an accelerating rate.

Affording Your Future

The bottom line when it comes to retirement is that you're on your own. The vehicles and the promises you've been given are proving woefully insufficient to fund the "retirement" dream you've been sold your whole life.

That's the bad news.

But the good news is that the dream is still attainable. There are strategies and behaviors that, if adopted now, will make it much more likely for you to be able to afford to retire -- and in a way you can enjoy.

In Part 2: Success Strategies For Retirement, we detail out these best practices for a solvent retirement, including providing 14 specific action steps you can start taking right now in your life that will materially improve your odds of enjoying your later years with grace.

For far too many Americans, "retirement" will remain a perpetual myth. Don't let that happen to you.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

The number of people serving life sentences now exceeds the entire prison population in 1970, according to newly-released data from the Sentencing Project. The continued growth of life sentences is largely the result of "tough on crime" policies pushed by legislators in the 1990s, including presidential candidate Joe Biden.

Biden has since apologized for backing those types of policies, but it seems he has yet to learn his lesson. Indeed, Biden is backing yet another criminal justice policy with disastrous consequences—mandatory drug treatment for all drug offenders.

Proponents of this policy argue that forced drug treatment will reduce drug usage and recidivism and save lives. But the evidence simply isn't on their side. Mandatory treatment isn't just patently unethical, it's also ineffective—and dangerous.

Many well-meaning people view mandatory treatment as a positive alternative to incarceration. But there's a reason that mandatory treatment is also known as "compulsory confinement." As author Maya Schenwar asks in The Guardian, "If shepherding live human bodies off to prison to isolate and manipulate them without their permission isn't ethical, why is shipping those bodies off to compulsory rehab an acceptable alternative?" Compulsory treatment isn't an alternative to incarceration. It is incarceration.

Compulsory treatment is also arguably a breach of international human rights agreements and ethical standards. The World Health Organization (WHO) and the United Nations Office on Drugs and Crime (UNODC) have made it clear that the standards of ethical treatment also apply to the treatment of drug dependence—standards that include the right to autonomy and self-determination. Indeed, according to UNODC, "people who use or are dependent on drugs do not automatically lack the capacity to consent to treatment...consent of the patient should be obtained before any treatment intervention." Forced treatment violates a person's right to be free from non-consensual medical treatment.

It's a useless endeavor, anyway, because studies have shown that it doesn't improve outcomes in reducing drug use and criminal recidivism. A review of nine studies, published in the International Journal of Drug Policy, failed to find sufficient evidence that compulsory drug treatment approaches are effective. The results didn't suggest improved outcomes in reducing drug use among drug-dependent individuals enrolled in compulsory treatment. However, some studies did suggest potential harm.

According to one study, 33% of compulsorily-treated participants were reincarcerated, compared to a mere 5% of the non-treatment sample population. Moreover, rates of post-release illicit drug use were higher among those who received compulsory treatment. Even worse, a 2016 report from the Massachusetts Department of Public Health found that people who received involuntary treatment were more than twice as likely to die of an opioid-related overdose than those with a history of only voluntary treatment.

These findings echo studies published in medical journals like Addiction and BMJ. A study in Addiction found that involuntary drug treatment was a risk factor for a non-fatal drug overdose. Similarly, a study in BMJ found that patients who successfully completed inpatient detoxification were more likely than other patients to die within a year. The high rate of overdose deaths by people previously involuntarily treated is likely because most people who are taken involuntarily aren't ready to stop using drugs, authors of the Addiction study reported. That makes sense. People who aren't ready to get clean will likely use again when they are released. For them, the only post-treatment difference will be lower tolerance, thanks to forced detoxification and abstinence. Indeed, a loss of tolerance, combined with the lack of a desire to stop using drugs, likely puts compulsorily-treated patients at a higher risk of overdose.

The UNODC agrees. In their words, compulsory treatment is "expensive, not cost-effective, and neither benefits the individual nor the community." So, then, why would we even try?

Biden is right to look for ways to combat addiction and drug crime outside of the criminal justice system. But forced drug treatment for all drug offenders is a flawed, unethical policy, with deadly consequences. If the goal is to help people and reduce harm, then there are plenty of ways to get there. Mandatory treatment isn't one of them.

Lindsay Marie is a policy analyst for the Lone Star Policy Institute, an independent think tank that promotes freedom and prosperity for all Texans. You can follow her on Twitter @LindsayMarieLP.

President Donald Trump's personal attorney, Rudy Giuliani joined Glenn Beck on Tuesday's radio program discuss the Senate's ongoing investigation into former vice president Joe Biden's son, Hunter Biden, and reveal new bombshell documents he's currently releasing.

Giuliani told Glenn he has evidence of "very, very serious crime at the highest levels of government," that the "corrupt media" is doing everything in their power to discredit.

He also dropped some major, previously unreported news: not only was Hunter Biden under investigation in 2016, when then-Vice President Biden "forced" the firing of Ukraine's prosecutor general Viktor Shokin, but so was the vice president himself.

"Shokin can prove he was investigating Biden and his son. And I now have the prosecutorial documents that show, all during that period of time, not only was Hunter Biden under investigation -- Joe Biden was under investigation," Giuliani explained. "It wasn't just Hunter."

Watch this clip to get a rundown of everything Giuliani has uncovered so far.

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For most Americans, the 1980s was marked by big hair, epic lightsaber battles, and school-skipping Ferris Bueller dancing his way into the hearts of millions.

But for Bernie Sanders — who, by the way, was at that time the oldest-looking 40-year-old in human history — the 1980s was a period of important personal milestones.

Prior to his successful 1980 campaign to become mayor of Burlington, Vermont, Sanders was mostly known around the Green Mountain State as a crazy, wildly idealistic socialist. (Think Karl Marx meets Don Quixote.) But everything started to change for Sanders when he became famous—or, in the eyes of many, notorious—for being "America's socialist mayor."

As mayor, Sanders' radical ideas were finally given the attention he had always craved but couldn't manage to capture. This makes this period of his career particularly interesting to study. Unlike today, the Bernie Sanders of the 1980s wasn't concerned with winning over an entire nation — just the wave of far-left New York City exiles that flooded Vermont in the 1960s and 1970s — and he was much more willing to openly align himself with local and national socialist and communist parties.


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Over the past few weeks, I have been reading news reports of Sanders recorded in the 1980s — because, you know, that's how guys like me spend their Saturday nights — and what I've found is pretty remarkable.

For starters, Sanders had (during the height of the Soviet Union) a very cozy relationship with people who openly advocated for Marxism and communism. He was an elector for the Socialist Workers Party and promoted the party's presidential candidates in 1980 and 1984.

To say the Socialist Workers Party was radical would be a tremendous understatement. It was widely known SWP was a communist organization mostly dedicated to the teachings of Marx and Leon Trotsky, one of the leaders of the Russian Revolution.

Among other radical things I've discovered in interviews Sanders conducted with the SWP's newspaper — appropriately named The Militant (seriously, you can't make this stuff up) — is a statement by Sanders published in June 1981 suggesting that some police departments "are dominated by fascists and Nazis," a comment that is just now being rediscovered for the first time in decades.

In 1980, Sanders lauded the Socialist Workers Party's "continued defense of the Cuban revolution." And later in the 1980s, Sanders reportedly endorsed a collection of speeches by the socialist Sandinistas in Nicaragua, even though there had been widespread media reports of the Sandinistas' many human rights violations prior to Sanders' endorsement, including "restrictions on free movement; torture; denial of due process; lack of freedom of thought, conscience and religion; denial of the right of association and of free labor unions."

Sanders also traveled to Nicaragua and met with socialist President Daniel Ortega. He later called the trip a "profoundly emotional experience."

Sanders also traveled to Nicaragua and met with socialist President Daniel Ortega. He later called the trip a "profoundly emotional experience."

Comrade Bernie's disturbing Marxist past, which is far more extensive than what can be covered in this short article, shouldn't be treated as a mere historical footnote. It clearly illustrates that Sanders' brand of "democratic socialism" is much more than a $15 minimum wage and calls for single-payer health care. It's full of Marxist philosophy, radical revolutionary thinking, anti-police rhetoric, and even support for authoritarian governments.

Millions of Americans have been tricked into thinking Sanders isn't the radical communist the historical record — and even Sanders' own words — clearly show that he is. But the deeper I have dug into Comrade Bernie's past, the more evident it has become that his thinking is much darker and more dangerous and twisted than many of his followers ever imagined.

Tomorrow night, don't miss Glenn Beck's special exposing the radicals who are running Bernie Sanders' campaign. From top to bottom, his campaign is staffed with hard-left extremists who are eager to burn down the system. The threat to our constitution is very real from Bernie's team, and it's unlike anything we've ever seen before in a U.S. election. Join Glenn on Wednesday, at 9 PM Eastern on BlazeTV's YouTube page, and on BlazeTV.com. And just in case you miss it live, the only way to catch all of Glenn's specials on-demand is by subscribing to Blaze TV.

Justin Haskins (Jhaskins@heartland.org) is editorial director of The Heartland Institute and editor-in-chief of StoppingSocialism.com.

Candace Owens, BLEXIT founder and author of the upcoming book, "Blackout," joined Glenn Beck on Friday's GlennTV for an exclusive interview. available only to BlazeTV subscribers.

Candace dropped a few truth-bombs about the progressive movement and what's happening to the Democratic Party. She said people are practically running away from the left due to their incessant push to dig up dirt on anybody who disagrees with their radical ideology. She explained how -- like China and its "social credit score" -- the left is shaping America into its own nightmarish episode of "Black Mirror."

"This game of making sure that everyone is politically correct is a societal atom bomb. There are no survivors. There's no one that is perfect," Candace said. "The idea that humanity can be perfect is Godless. If you accept that there is something greater than us, then you accept that we a flawed. To be human is to be flawed."

Enjoy this clip from the full episode below:

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BlazeTV subscribers can watch the full interview on BlazeTV.com. Use code GLENN to save $10 off one year of your subscription.

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To enjoy more of Glenn's masterful storytelling, thought-provoking analysis and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution and live the American dream.