The Financial Crisis and Middle Class Retirement

It's ironic to read a piece like this in the Wall Street Journal, since their editorial page routinely fluffs the myopic free market obsession that helped create this mess:

The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse.

[...]

"Inevitably, we find that, for the average person, there is not enough there," says financial adviser Paul Merritt of NTrust Wealth Management in Virginia Beach, Va., who has found himself advising many retirement-age people with too little savings. "The discussion turns out to be: What kind of part-time work do you want to do after you retire?" He has clients contemplating part-time work into their 70s, he says.

I think the clear solution here would be to slash Social Security benefits that threaten the very fiscal stability of our fragile democracy plutocracy, and cut marginal tax rates on the top 2% of income earners while simultaneously repealing the capital gains tax altogether. Only with the socialistic, autocratic federal government out of the way can the invisible hand and free market Jesus allow the benefits of the reduced tax revenues of our wealthy lords and masters to trickle down and solve the looming retirement crisis through new jobs with double the previous salaries/benefits.

Bitter sarcasm aside, it might be funny if so many in our government weren't seeking to do exactly that. We've already extended tax cuts for the richest 2% of income earners, and now Congress (and President Obama, in some cases) seeks to reduce the deficit by seeking draconian austerity measures and otherwise generally exempting our single largest source of federal discretionary spending: defense. Twenty percent of federal spending is wasted on our bloated, obsolete defense budget that seeks to re-fight the World and Cold wars, but our Very Serious political class seeks token cuts that will have no viable fiscal impact, but will fuck the poor instead. It's utter bull shit. This fits right into what I wrote previously about how Republicans (and some Democrats) would never run a business the way that they run government. If your business is over leveraged to the hilt and you're seeking for ways to free up cash and reduce your debt, you don't go looking for savings in cutting coffee service to rank and file employees while ignoring the millions that you spend annually on private jets and other shit you don't need.


But back to the matter at hand of how the free market has blessed our ability to not work until we all look like the Crypt Keeper:

The difficulties have been worsened by the 2007-2009 financial crisis. Since the housing and financial markets began to collapse, about 39% of all Americans have been foreclosed upon, unemployed, underwater on a mortgage or behind more than two months on a mortgage, says Michael Hurd, director of the Rand Corporation's Center for the Study of Aging.

In 2008, when he was 59, John Mastej figured he was on track to retire in his early 60s. He and his wife both were working, with 401(k) plans. Counting all their savings, they had close to $200,000. Mr. Mastej was putting 20% of his salary into his 401(k).

The financial collapse cut their savings in half and left Mr. Mastej out of work for two years, with no 401(k) contributions. He had to dip into other savings and use up an inheritance to pay the mortgage. He found a new job in a specialty food store, but it paid much less than his old one in a plastics factory.

If you read the entire article, it's full of other similar tales of woe where basically none of the individuals interviewed can afford to retire any longer and are now looking at an additional 5 - 15 years in the workforce to compensate (and if history is any guide, 5-15 years is plenty of time for another crisis/bubble to foment itself). This has real implications: limiting the upward mobility or ability to retire of those in the twilight of their careers has a cascading effect on those below them in the labor force. If workers aren't able to retire, then logic suggests that those below them are unable to get promoted or succeed their vacancies.


So now with 123 million either foreclosed upon, out of work, underwater/behind on their mortgage, where are the prosecutions? This is a crazy idea, I know, but I think that if those individuals found to be criminally liable for their roles in the financial crisis were indicted, convicted, and thrown in federal prison, banksters might be a lot less likely to pull this shit again in the future. 


Update - John Cole notes the following about the same story:

It’s important to keep in mind that this is the model for the future foisted upon us by our Galtian overlords (who fight any attempts to regulate the looting on Wall Street), and the austerity mobs are busy making sure that the pension you were promised is hatcheted and your social security is whittled away because we can’t afford it after lavishing all the social security proceeds on the rich in the form of the Bush and Obama tax cuts. But don’t worry, you will also have your collective bargaining rights stripped away, removing the last upward pressure on wages, and with Medicare rate increases you’ll have the peace of mind to know that you are contributing more to your health care.

How does it feel being fisted by the Invisible Hand, America?