On June 2, 2017, Mark Singer writes on Employee Benefit News (EBN):
Saving for retirement has traditionally been presented as a means to an end. People are told to make this or that occasional investment and voilà, funds will be available when retirement age arrives. However, as numerous sources of data prove, Americans are largely unprepared for retirement even after years of being “taught” how to do so.
With so many savings options available and approximately 50% of companies offering retirement training along with those options, why are the statistics so out of balance?
There are questions that have to be asked concerning the present form of retirement savings education. When retirement plan providers and financial advisers visit jobsites to provide educational sessions to employees concerning the saving of money for retirement, are they presenting the information in a way that connects with employees? It is obvious from the available data that a connection with the majority of workers is not taking place. We are often forcing the “retirement ready” conversation, when the reality is that the employee may be distracted by other financial stressors at the time.
The issues that are the most important to them are not being addressed, and in time slots that are the most convenient for them, so they are distracted.
Immediate needs
The “retirement ready” and enrollment conversations are not working because a specific agenda is being forced on them, one that does not readily meet their immediate needs, and they are not listening. However, if the conversation is changed to connect with those immediate needs, then it is more likely that their stress over personal finances will be lessened and positive feelings enhanced as they get a better handle on everyday financial issues. This would, in turn, lead to increased participation rates and contribution levels in existing savings programs. Not only are workers provided financial relief through such an outreach, but employers receive increased production and bottom lines and society is less burdened overall in the future.If the majority of people do not have a clear understanding of the savings process, then they will remain hesitant about making investments and prefer to continue using any extra money to lessen present financial conditions and stresses. This thinking is adequately reflected in the saying “a bird in the hand is worth two in the bush.” What employees need to see is that once that bird in the hand is consumed there is nothing left for tomorrow.
The other important question that needs to be asked is: Are employees being given clear guidance on how they can save for their retirement by truly addressing what behaviors need to change in order to free up funds to save for their futures? As has been shown, there are plenty of savings options available to working Americans, and yet relatively few are taking advantage of such retirement vehicles. And even those who do participate are saving at such low levels that they will not be able to retire as desired. If problematic spending and borrowing habits aren’t addressed, it will be difficult to reverse the current trends, and employers, employees, and society as a whole will all suffer as a result.
https://www.benefitnews.com/opinion/how-retirement-savings-education-is-falling-short
Gary Reber Comments:
We have a serious problem. The truth is this: the concept of a do-it-yourself retirement is a fraud. It is a fraud because to expect people to save up enough money to see themselves through a 20- or 30-year retirement is a dubious proposition in the best of circumstances.
“The experts” keep telling you to cut consumption and accumulate what you don’t consume as savings . . . but they don’t tell you that the more you do this, the worse off you are, especially if everybody does it.
If people are saving instead of buying (consuming products and services), people in business have no reason to borrow your money to produce more goods and services — you aren’t buying what they’re producing now! They should produce more? Face it, you’re not going to be able to circumvent Say’s Law of Markets.
As my colleague Michael D. Greaney at the Center for Economic and Social Justice (www.cesj.org) explains: “Suppose an economy produces $1,000,000 worth of goods and services in a year. Being good little girls and boys, everybody saves 20 percent of his or her income, or an aggregate of $200,000 — production equals income, you know. That means that $200,000 remains unsold.
“What happens to the $200,000? Well . . . nothing, actually. Nobody wants to borrow it to make more goods and services that will just pile up unsold, so it goes into the bank at zero interest, or into a sock under the bed at zero interest. In the meantime, because there’s no new investment going on, there’s nothing to live on when you retire, anyway.”
There are, in addition, some serious conceptual problems with saving. The most obvious is that any savings program requires that workers reduce what for most is inadequate consumption income in order to accumulate savings for inadequate retirement income.
Then there’s the more serious problem that savings programs are funded by reducing consumption at a time when what is needed to stimulate the economy is increasing consumption. That’s what past savings is, after all: the excess of income over consumption.
I’ve said it before and I’ll say it again: It’s great to be unemployed and retired if you can afford it!
So far the attempts to address the fact that Americans are not saving enough for retirement do not address the REAL cause. And the proposals put forth fall far shot by “trillions” of dollars.
The plain truth is that more than four in five older Americans expect to keep working during their latter years, a sign that traditional retirement is out of reach for vast swaths of society. According to a recent survey poll conducted by the Associated Press-NORC Center for Public Affairs Research, among Americans ages 50 and older who currently have jobs, 82 percent expect to work in some form during retirement.
In other words, “retirement” is increasingly becoming a misnomer.
For those who have been dependent on employment and/or welfare, the problem is that financially sustainable retirement is and will no longer be a reality. Even with Social Security, which is funded through payroll taxes called the Federal Insurance Contributions Act tax (FICA) and/or Self Employed Contributions Act Tax, (SECA), one must have had a job to be eligible for the entitlement––and the amount of Social Security is based on the income level generated from one’s employment record of payroll tax contributions.
Employer-provided pensions continue to decrease and personal savings is not the norm among the vast majority of American households who must spend virtually every earned dollar on living expenses, and incur consumer debt to secure automobiles and housing, as well as other consumption. While increasingly individuals are finding it necessary to continue working in retirement to supplement their income, most older Americans discontinue full-time career work and struggle to meet obligations with minimum-pay part- and full-time jobs. A proportion of retirees also receive income from welfare programs, such as Supplemental Security Income and other life-support services funded through tax extraction and government debt.
This perspective should serve as the “reality” from which to explore prospects for effectively dealing with eroding retirement security.
Proposals that have received national media attention offer lifetime income security funded out of current savings, meaning further reductions in consumption out of already inadequate incomes.
Such proposals will not succeed in providing any real, substantial retirement security for the majority of Americans whose jobs do not earn more than substance week-to-week and month-to-month wages. Retirement proposals are designed to encourage Americans to save for retirement and require personal savings and denial of consumption. This is unrealistic given that the Americans with the least opportunity must reduce what is inadequate consumption income in order to accumulate savings for retirement, which for most Americans will be inadequate.
Does anyone really believe that the interest rate to be paid under the proposed programs advocated will be sufficient and able to avert the decline in the value of the money as the government continues to flood the economy with increasingly non-asset-based debt?
Retirement proposals rely on the requirement to reduce consumption in the economy at a time when what is needed is expansion of the economy supported by increased consumption.
As my colleague Michael D. Greaney at the Center for Economic and Social Justice (www.cesj.org) states, “under the prevailing Keynesian paradigm, of course, ‘saving’ is always defined as the excess of income over consumption. If you want to save, then, the iron assumption of Keynesian economics is that you must consume less.”
The American consumer is being put into an impossible situation of being asked to consume more to drive the economy and reduce saving, and at the same time are being told they must reduce consumption dramatically in order to accumulate sufficient savings for retirement.
Of course, the whole problem would go away if we financed both retirement and wealth-creating, income-producing physical productive capital needs out of “future savings,” thereby increasing the capacity to consume and support the economy while simultaneously building financial security for every American citizen.
A far better and productive approach would be to create a new way for working and non-working Americans to start their own retirement savings: MyCHA. CHA stands for Capital Homestead Account. It would be a super-IRA or asset tax shelter for citizens. The Treasury should start creating an asset-backed currency that will enable every child, woman and man to establish a CHA at their local bank to acquire a growing dividend-bearing stock portfolio comprised of newly-issued stock (not the secondhand stock traded on the gaming securities markets) representative of true investment in viable American growth corporations to supplement their incomes from work and all other sources of income.
We can create new asset-backed money for investment through the existing but dormant Section 13(2) rediscount mechanism of each of the 12 regional Federal Reserve banks that would be backed by “future savings” (that is, future profits from higher levels of marketable goods, products, and services).
The CHA would function as a savings and income account that effectively would build a nest egg over time, using interest-free, insured capital credit loans. A CHA would be offered to EVERY American, whether employed or not. Of course, those employed may also have additional opportunities to acquire personal ownership in their companies using an Employee Stock Ownership Plan (ESOP) trust financial mechanism.
The CHA would process an equal allocation of productive credit to EVERY citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets. The shares would be purchased using capital credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable products and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy. Risk of default on each stock acquisition interest-free loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares. There would be no prerequisite requirement to qualify for an annual set capital credit loan other than American citizenship.
This idea to stimulate economic growth and provide retirement security for EVERY American is based on the premise that what is needed is for the system to facilitate spreading the ownership of productive capital more broadly as the economy grows with full payout of dividend earnings, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate productive capital wealth assets. In doing so, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader.
This would benefit the traditionally disenfranchised poor and working and middle class, who are propertyless in terms of owning productive capital assets. It would also result is tremendous economic growth, which would benefit everyone including the already wealthy ownership class, and create opportunities for real jobs, not make-work as an expanded economy is built that can support general affluence for EVERY American citizen. Thus, as productive capital income is distributed more broadly and the demand for products and services is distributed more broadly from the earnings of capital, the result would be the sustentation of consumer demand, which will promote economic growth. That also means that over time, EVERY child, woman and man could accumulate a diversified portfolio of wealth-creating, income-producing productive capital assets to provide economic security in retirement and not be dependent on having to work during retirement or rely on government-assisted welfare.
One might ask how we failed to grasp the significance of productive capital’s input and the necessity for broad private sector individual ownership? Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader productive capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Yet, the wealthy ownership class knows that this notion is idiotic.
In real productive terms, productivity gains are the result of tectonic shifts in the technologies of production, which consequently eliminates the need for human labor, destroys jobs, and devalues the worth of labor.
One should ask what form would the structural reforms take. At birth an CHA capital account would be established for a lifetime to become increasingly a productive capital owner. Employment in this new enlightened age would start at the time one enters the economic world as a labor worker, to become increasingly a productive capital owner, and at some point to retire as a labor worker and continue to participate in production and to earn income as a productive capital asset owner until the day you die.
As a substitute for inheritance and gift taxes, a transfer tax should be imposed on the recipients whose asset holdings exceeded $1 million. This would encourage those owning concentrations of productive capital assets (effectively the 1 to 10 percent) to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
Other stipulations for the structural reform would entail tax policy reform to incentivize corporations to pay out all profits to their owners as taxable personal incomes to avoid paying stiff corporate income taxes and to finance their growth by issuing new full-dividend payout shares for broad-based individualized employee and citizen ownership with full-voting rights.
We need to encourage the insurance industry to expand their product lines to market Capital Credit Insurance to cover the risk of default for banks making loans to Capital Homesteaders under the proposed Capital Homestead Act (aka Economic Democracy Act). Under the provisions of the Act, risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance issued by a new government agency (ala the Federal Housing Administration concept), but would not require citizens to reduce their funds for consumption to purchase shares.
The end result is that ALL American citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing our country’s trend where all citizens are becoming more dependent for their economic well-being on the “state,” our only legitimate social monopoly.
Implementing the Capital Homestead Act would significantly empower ALL Americans to accumulate over time a viable, diversified ownership portfolio in our nation’s growth companies and create a truly unique, global-leading just and environmentally responsible Ownership Society that fosters personalism, creativity and innovation. Embarking on a new path to prosperity, opportunity and economic justice will expand growth of our market economy in ways that democratize future ownership opportunities, while building a future economy that can support general affluence for EVERY American.
In conclusion, the conventional savings required––denial-of-consumption––programs would be completely unnecessary if we had Capital Homesteading. We desperately need political leadership that will advocate for the passage of the Capital Homestead Act.
See references to the proposed Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.
For more on how to accomplish such structural reform, see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at http://www.foreconomicjustice.org/?p=17032 and “The Income Solution To Slow Private Sector Job Growth” at http://www.foreconomicjustice.org/?p=9872.
