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Social Insecurity: Getting the Facts Straight About Retirement

Social Insecurity by James W. Russell
Are you worried about the future as you approach retirement age? Did you watch your 401(k) shrink dramatically during the 2008 recession, taking your dreams of retirement with it? Are you worried that your retirement account may never recover from those losses? Sadly, you're not alone. According to a recent study of 2.2 million large-company employees who have 401(k)-type plans, 85% will not have sufficient resources to meet their needs if they retire at age 65.

How did we get to this state of affairs?

In Social Insecurity: 401(k)s and the Retirement Crisis, retirement expert James W. Russell shows how and why a majority of Americans moved from the stability of traditional pensions to more volatile market-based 401(k) accounts. In the process, he exposes what amounts to a massive and international retirement robbery—a substantial transfer of wealth from everyday workers to Wall Street financiers via tremendously costly hidden fees.

Here are a few facts that Russell has compiled about the current state of retirement in the US, and why this is a book whose time has come:

  • Social Insecurity by James W. RussellSince the 1980s, 401(k)-type retirement plans have been steadily replacing traditional pensions throughout the United States. In 1981, 59% of private-sector employees who had retirement plans had traditional pension plans. By 2010, that number had plummeted to 19%—while a staggering 81% of private-sector employees were enrolled in 401(k)-like plans.

  • Defined contribution participants typically lose between 20-30% of their accumulations to investment management fees charged by the financial services industry, such as administration fees and commissions.

  • The rising cost of education makes it increasingly difficult for people to save money for retirement: The cost of college education has more than tripled over the past three decades, while the average per capita income has not even doubled. For the 2012-2013 academic year, the average cost of public four-year colleges and universities was 3.57 times what it was for the 1982-1983 academic year. For the same period, average per capita income was only 1.37 times higher.

  • Conservative think tanks and the financial services industry have manufactured a campaign of misinformation to convince the public that 401(k)s are the best approach to retirement. Don't believe these myths, often touted as fact:

    • Myth: The 401(k) plans produce higher rates of return than traditional pensions or Social Security.
    • Myth: The 401(k) plans are cheaper for employers and employees than traditional pensions.
    • Myth: Social Security is going broke and therefore needs to be privatized or reduce its benefits.
    • Myth: Unfunded liabilities of overly generous public employee pensions will require taxpayer bailouts.
    • Myth: There is no fiscally sustainable alternative to 401(k)s.
    • Myth: Only when individuals do not save enough do 401(k)s fail to provide adequate retirement income.

  • The Wall Street-aligned financial services industry has profited enormously from the shift to 401(k)-like retirement accounts, tripling its share of gross domestic product since 1971, and increasing its share of all corporate profits from 19.1% to 27.1%. 

The facts may be enraging, but the book remains ultimately hopeful, with Russell offering concrete ideas on how individuals, and society, can arrest this downward spiral. With some fortitude, and more than a few long overdue changes, we might just halt our declining balances and return to a state of retirement security.

Read more about the retirement crisis on the Beacon Broadside:



JAMES_RUSSELL-by_Kim_BovaJames W. Russell is the author of Social Insecurity: 401(k)s and the Retirement Crisis. An authority on retirement policy in the United States, Europe, and Latin America, he led one of the first employee movements to successfully challenge the dominant trend and replace a 401(k)-like plan with a more secure traditional pension plan. He has taught at universities in the United States and as a Fulbright professor in Mexico and the Czech Republic. He lives in Storrs, Connecticut.