PLANADVISER - July/August 2017 - 2

editor's letter
Setting the Record Straight
A
few weeks ago, while I was looking for news about
retirement plans, I happened upon a CNN Money
article titled, " 4 Money Problems That Didn't Exist 50
Years Ago (and How to Fix Them). "
I clicked on the headline to look for the retirement
connection and I was grossly disappointed by what I saw,
because, what was one of those money problems? Saving
for retirement.
The article, written by Wendy Connick for The Motley
Fool, says, " Once upon a time, everyone worked for the
same company their whole working lives, and at the end
of their career, they retired with a fat
pension. Today, only 32% of retirees have
any pension at all, and that number is
trending steeply downward as employer
pensions continue to vanish. That means
the responsibility for financing a worker's
retirement falls almost entirely on the
worker. And given how bad Americans are
at saving money, a lot of retirees run into
serious income shortages as a result. "
So why does something like this frusThe
idea that
people worked
trate me? Let's look at the working-forone-company-their-whole-lives
part of the
article. According to the Bureau of Labor
Statistics, in 1963, the median job tenure
for workers ages 14 and older-both men
and women-was 4.6 years, and, if you
looked at just men, it was shy of six. To dig
into this more, and control for the younger
workers, median job tenure for men ages
45 through 54 was between 11 and 12 years. So yes, half of
workers had more time than that at an employer and would
potentially accumulate sizeable pension income. However,
it's far from the " everyone " cited in the article. A career
lifetime with a single employer is not happening for most
employees now, nor was it happening 50 years ago.
Considering that job tenure fact, it's pretty easy to
ago. For reference, according to the U.S. Bureau of Economic
Analysis, in July 1967, the personal saving rate was 12.5%.
When you compare that with May of this year, when the rate
was 5.5%, it seems that many of these articles are missing
the opportunity to tell Americans that people weren't just
relying on their employer to provide retirement security but
were taking it upon themselves to save for their future.
In fact, pensions were traditionally discussed as part
of the " three-legged stool " of retirement, which said that
retirement income would come from three sources: a workfor
one company
their whole lives
and then got
a " fat " pension
at the end is
not proven by
evidence.
place pension plan, Social Security, and personal/private
savings. Yes, as Americans we currently
face challenges in all three of those
areas: Workplace defined benefit (DB)
plans continue to decline; without major
changes, Social Security will run out of
money in a couple of decades; and Americans
have a woefully inadequate savings
rate to fund time without income. Considering
many employers make some sort
of employer contribution to their defined
contribution (DC) plans, maybe we should
start replacing pensions with employer
contributions in that stool concept.
The author does provide a solution-
she says, people should save early and
" work a little harder to squeeze more cash
out of your budget and be disciplined about
paying yourself first. " That is helpful, as is
her following sentence: " Luckily, workers
today have access to powerful tax-advanexamine
what really happened to those getting pension
money, because " fat " pension accumulation is dependent
upon company tenure. Let's also remember that 50 years
ago was before the passage of the Employee Retirement
Income Security Act (ERISA)-legislation that grew out of
companies being unable to meet pension obligations, even
to employees who had earned " fat " ones.
Personal finance writing continues to harp on the decline
of pensions as being why people are unprepared for retirement.
The only thing I found somewhat redeeming in this
piece was that at least the writer alludes to the poor savings
rate of Americans. However, what she doesn't say is how poor
that savings rate is and how it differs from saving 50 years
taged retirement accounts, [such as] 401(k)s and IRAs [individual
retirement accounts] that can help maximize whatever
savings they manage to accrue. " But it doesn't mention
that employers often contribute to these plans, even if not
to traditional pensions, nor does it explain that Americans
saved money 50 years ago that likely went toward their
retirement income.
Overall, narratives such as those in the article that seem
to suggest Americans never had to take part in their retirement
income picture are flat wrong and ignore the actual
data. It's not wrong to say that pensions have declined.
However, the idea that people worked for one company their
whole lives and then got a " fat " pension at the end is not
proven by evidence. Articles such as this one do all Americans
a massive disservice. The issue is that the personal
finance stories leading with the idea that, historically,
Americans didn't have to take ownership or responsibility
for their retirement only breeds resentment when people
feel like they are being treated unfairly now or are getting
shorted. -Alison Cook Mintzer, Editor-in-Chief
2 | planadviser.com july-august 2017
http://www.planadviser.com
PLANADVISER - July/August 2017

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