Jane White: Your 401k Isn’t Enough

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Tue, Oct 6 - 3:37 pm EDT | 5 years ago by
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Last week, reviewed a book called America, Welcome to the Poorhouse: What YOU must do to protect your financial future and the reform we need by Jane White. I asked a few more questions about White’s book, and asked her to weigh in on the current health care debate — even though it isn’t covered in her book.

Your 401k isn’t enough

One of the things that White points out is that your 401k probably isn’t enough to retire on:

“Unless they are the tiny percentage of the workforce that has long job tenure at a company that still offers an old-fashioned pension, most of those 38 million Boomers born between 1946 and 1956 who are scheduled to retire between 2011 and 2020–nearly one-quarter of the workforce–will have to stay on the job another eight to 10 years to achieve a 401(k) balance equal to at least 10 times their salaries near retirement.”

58521540Americans aren’t saving enough, and employers aren’t required to put in that much. In fact, according to White, U.S. employers contribute less to retirement than just about every other developed nation — and even some developing nations (Mexico has us beat, as does Poland and Slovak Republic). White advocates a  mandatory retirement contribution from employers. When I pointed out in my review that this idea (plus the idea of having the government cover more education expenses for higher education) was radical, White took exception:

“I’m not sure why you think my reform is radical, given that we are the richest nation on earth. Australia is one of eight countries that has a mandatory  401(k) style system and seven of them are more generous than ours; the average employer contribution rate is 7.25% of pay, Denmark’s is 11.8 percent, Hungary’s is 8%, Mexico’s is 6.5%, Poland’s is 7.3% and the Slovak Republic’s is 9%. In the United Kingdom, 55% of the population is covered by a regular pension compared to only 17% in the U.S.”

While I, personally, don’t think the idea is so radical, I know that many here in the U.S. would think that such reform is radical. The fact that we are the richest nation on earth does little to impress upon us as a society what we could do with that to make life better for everyone. Instead, our mind set is so incredibly individualistic that we continue to pursue policies that have been resulting in a widening gap between rich and poor, and the extinction of the middle class, for nearly three decades.

Health care reform

Another necessity, in addition to meaningful mortgage reform, retirement reform and changes to how we pay for higher education, is health care reform. Costs are getting out of control. But that won’t change, White says, until lobbyists no longer have the power they do over legislators. Citing data from the Center for Responsive Politics, White points this out about the guy in charge of health care reform:

“Nothing will change in Congress until we shut down K Street, the center of lobbying activity in Washington, D.C. The man who killed the “public option”, Sen. Max Baucus, raised a whopping $11 million since 2005 and doled out $9 million to his colleagues so that they would vote his way. Only Sen. Orrin Hatch collected more than Baucus from Big Pharma.”

What do you think? Are we going to be stymied in a quest for meaningful reform due to lobbying interests?

Image source: Daylife

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  • http://thebizoflife.blogspot.com/ The Biz of Life

    No surprise, I’m sure, but I’m not in favor of any more Nanny state ideas. This country was founded on the principles of individual freedom and responsibility, not collectivism, not give me some of yours because I deserve it just as much as you do, not mandated charity through taxation, but charity through individual choice, and we are the most generous nation in the world.

    We already have a mandated retirement plan called Social Security developed by our central planners in Washington that takes 6.2% from the employee and 6.2% from the employer (12.4% total and 12.4% from the self-employed) that is designed around a number of shaky premises and is in financial trouble (the more plain spoken might say it is a ponzi scheme where the early contributors are paid off with money from the late contributors). If it survives, this is enough for most to allow a standard of living above the poverty level. Then we have IRAs, voluntary 401ks, and regular savings and investing. If a person is committed to saving, they will have a good retirement, if not there’s always Social Security, but people make their choices and reap what they sow.

    Of course, mandates arrive with many unintended consequences that result from trying to manipulate natural market forces into a desired outcome, such as the excessive inflation in Health Care and Education caused by government subsidies and market controls.

    If Congress has been so corrupted by lobbyists why should we trust anything they do? What’s with this pervasive mindset that assumes Washington has to provide all the solutions to our problems? Congress is the most dysfunctional, downright stupid and self-serving group of people in the world. Why shouldn’t we just empower ourselves to take charge of our own lives, instead of waiting for our Nanny to give us a bottle and lull us to sleep?