WASHINGTON, D.C. Jan. 5 (DPI) – Two retirement experts – one an academic, the other an investment professional – proposed another public retirement benefit separate from Social Security, and the 453 reader comments almost universally – and wisely – dismissed it as another bureaucracy intended to serve and reward insider-political cronies. The proposal, offered up enthusiastically by The New York Times on Jan. 1, called for a new tax on workers and employers, the proceeds of which would be managed by investment managers hired by the federal government, and provide a guaranteed benefit to future retirees.
As usual the proposal to create another government program is well intended: America’s retirement crisis is only worsening. The private sector has largely abandoned traditional pension plans – so-called defined benefit plans in which employers made a promise of a fixed benefit – in favor of employee-directed 401(k) and other defined-contribution plans. Those employee accounts – for the most part – haven’t worked terribly well, as employees access funds early and generally make inappropriate investment decisions that hurt returns and retirement security.
To a surprising degree, readers responding to the proposal by professor said the proposal solved little and only benefited the organizers and bureaucrats running it. If Washington really wanted to improve retirement security, readers said, it should expand Social Security benefits.
http://www.nytimes.com/2016/01/02/opinion/a-smarterplan-to-make-retirement-savings-last.html
The top seven recommended reader comments:
It would be simpler to just expand Social Security — which could be done easily by lifting the current cap, and tax all income.
This proposal, by contrast, would continue to grow bankers’ profits. It’s privatization under another name.
Social Security works. What has not worked is the self-directed IRA. It’s made banks wealthy, and ordinary workers poorer. It’s time to end the horrendous mistake which is the current IRA system, and go back to guaranteed pensions.The problem isn’t a shortage of accounts to save money for retirement. The problem is wages that are way too low for the majority of Americans especially with extortion level costs for medical care, day care and education.
It’s not clear to me how this is different than Social Security itself. Why not just expand that?
Another approach that should be both easier to accomplish and easier to understand: just expand Social Security.
Congress let big corporations get out of the pension business and substitute cheap 401(k) plans that as the article points out are woefully underfunded. No more gimmicks. It’s the government’s job to provide a secure retirement for its citizens and they just need to raise taxes and expand Social Security to get it done.
After we are done rearranging the deck chairs on the Titanic, maybe we will pay attention to bigger and more urgent problems – deflationary pressures unleashed by cheap and super productive labor forces, and yawning inequality brought about by the rich and powerful dictating tax policies to their advantage. Take adequate actions to address these core problems. Inadequacy of retirement plans is just a small symptom of the much bigger problem that apparently dares not speak its name.
No fees, no politicians, exempt from debt collection or attachment. If Wall Street gets their claws in it they will lard it with fees to line their pockets and rob you of any growth. The simplest thing to do would be to expand Social Security by rising the amount of income subject to tax, indexing that cap to inflation, taking the inflation rate calculation out of the hands of politicians (chained CPI, for example, was an attempt to cut benefits over time by understating inflation), and allowing working Americans the option of increasing the amount of money they contribute to the system. The last thing we need is another bureaucracy.
The authors say that the “retirement portfolios would be created by a board of professionals who would be fiduciaries appointed by the president and Congress and held accountable to investors.” I’d like to know more about just how these professionals would be held accountable. Since they would be appointed by the President and Congress, we can be fairly certain that they will be cronies of the politicians. Just look at the revolving door between Wall St and Washington that we have today. Who will decide when they aren’t living up to expectations? The citizens they are working for, or the politicians who appointed them? And what will the penalty be for these investment professionals should they fail to deliver the promised returns? Loss of their personal fortunes? Jail? Or will they just be kicked out and allowed to go back to a fat cat job on Wall St?