Against Cozy Catastrophies
In 1978, Jimmy Carter’s IRS created the 401(k) retirement program. Prior to this, most Americans had two ways to enjoy a dignified retirement: Social Security, and employer-provided defined-benefits pensions, which guaranteed you a proportion of your final salary every month from your retirement until your death.
The 401(k) was a third way to plan for retirement: you could gamble in the stock-market, and hope that you weren’t the sucker at the table. At first, this was a great deal: between the tax-breaks for 401(k) bets and generous employer-matching funds, many workers and unions were convinced to trade their sure-thing defined-benefits pensions for market-based alternatives.
We know how that turned out. The vast majority of American workers have almost nothing saved for their retirements. There’s a reason for that: wages have stagnated since the Carter era, leaving workers with little-to-no excess cash to invest in their 401(k)s.
Even if you’re lucky enough to have saved something, that’s no guarantee. Most of us are woefully unqualified to make bets on the stock market. Even if your bets pay off, the deregulation of markets has produced wild, calamitous crashes that offer a stark choice to savers: eviction and hunger, or cashing in retirement savings and paying ruinous penalties.
Meanwhile, Social Security benefits have also stagnated. Unless something changes, millions of younger boomers, Gen-Xers and millennials will find themselves pushed out of the labor market, into decades of “retirement” characterized by predatory Medicare drug-plans, sky-high rents and routine evictions, immortal student debt, no savings, and sub-starvation Social Security benefits.
But maybe that’s not you. Maybe you were lucky enough to have excess income, maybe you were lucky enough to put that excess into sound investments, maybe you were lucky enough to dodge crises that would have forced you to cash out early.
You’re still screwed. Remember J. Paul Getty’s maxim: “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s…