Bountiful pensions and retirements free from worry? The ‘golden age’ of retirement is a lie.

By Brett Arends

There was never a “golden age” of retirement in America.

Retirees 30 or 40 years ago did not have it better than retirees today. Retirees do not have it so much better in other countries. There is no nirvana of free everything for the over-65s. Anyone who thinks the retirement system is better in Kazakhstan – where 80% of rural homes still have outdoor toilets – should move there and try it.

But these retirement myths and fairy tales die hard. And they were on display on Capitol Hill on Wednesday, where Bernie Sanders’s Senate “Health, Education, Labor and Pensions” (i.e., “HELP” – get it?) committee held yet another dog-and-pony show on the subject.

America faces huge retirement challenges, but it’s hardly going to help us get to where we are going if we can’t even agree where we are, let alone where we used to be.

So where do you want to start? A number of speakers – senators and witnesses – harked back to the supposed good old days, where beneficent American corporations lavished wonderful pensions for life on all their workers and everyone lived, retired and died happy.

This golden age was supposedly before the great plague of “greed” suddenly attacked the country, out of nowhere, ’round about 1980.

Never let the facts get in the way of a good story, right? It’s all baloney.

Private-sector pensions were always for a privileged minority. According to the Congressional Research Service, in 1980 fewer than 27% of Americans over 65 had a pension. The peak, around 1990, was 37%. At most, private-sector pensions provided about one-fifth of all retirement income.

The number who paid into a pension was much higher. But they didn’t get to draw out much, or anything, unless they’d been with an employer for a long time. If you had a job for life with one company then, yes, you probably did pretty well. But if you didn’t, you could easily get hosed.

Those “golden age” private-sector pensions were so great that Congress had to pass the sweeping, landmark 1974 Employee Retirement Income Security Act, or ERISA, to try to curb many of the (legion) rampant abuses.

Read: ERISA killed defined-benefit pension plans, Yale Law School expert argues

Those pensions didn’t get abolished out of sheer “greed” either. They went away because the economy changed.

It was no coincidence that Sanders called a “fourth-generation” Detroit auto worker to testify about the good old pensions her grandparents got.

The “Big Three” could once afford generous pension plans because until the 1970s they had over 90% of the U.S. car market. Today it’s about 30%.

Oh, and car prices are far lower today in real, inflation-adjusted terms, according to official U.S. government data.

It’s amazing what you can afford if you run an oligopoly at the expense of the consumer.

So, folks, just turn in your Toyotas, Hondas, Nissans, Hyundais, Subarus, Mazdas, BMWs, Mercedes, VWs and Teslas, and go back to paying through the nose for a Big Three car with no AC, no radio, no heated seats, no power windows, and no full seatbelts, that uses leaded gasoline and gets about 30 yards to the gallon, and, sure, maybe we can look at restoring those old Big Three pensions.

Oh, but you’ll have to die younger so we can afford them. The average life expectancy at 65 today is about 20 more years. In 1960 it was about 14 years.

If everybody went back to smoking, the big tobacco companies could probably afford more generous pensions too.

Meanwhile, if we are going to go back to the “golden age,” then everybody over 65 is going to have to take a 50% pay cut.

According to the U.S. Census, the median household income among the over-65s is now $50,290. In 1980 it was…$30,217 in today’s money. (See table 15, here, and then adjust for the rise in consumer prices from 2004 to 2024).

In 1969? Try $23,777. Less than half of income today.

And these are medians, the type of average which avoids distortions caused by a few big numbers.

These good old days are sounding better and better, aren’t they?

Meanwhile, somehow the Senate managed to talk about this issue for an hour and a half without looking at three key things that could transform the outlook for Social Security or retirement: Cracking down on tax cheats, taxing assets as well as income, and investing the Social Security trust fund in the stock market, like every other pension fund on the planet.

Meanwhile there’s the myth that somehow everyone else has it better. Pretty much every foreign country is held out as having a superior retirement system to America’s. All the Western European countries, of course, as well as plenty of others. Even Kazakhstan got a shoutout during the Senate hearings.

In most countries, including those in Western Europe, retirees grumble that the grass is greener everywhere else. Yes, the Danes have generous pensions. But they also pay much higher taxes.

One of the key sources for this is data compiled by the Paris-based Organization for Economic Cooperation and Development, or OECD, which publishes data on “elder poverty.” A casual reading of the data would suggest that America has a higher percentage of seniors in poverty than many other countries.

If only there weren’t any footnotes! Here’s the key one at the OECD: “For international comparisons, the OECD treats poverty as a ‘relative’ concept. The yardstick for poverty depends on the median household income in a particular country at a particular point in time. Here, the poverty threshold is set at 50% of median, equivalized household disposable income.”

My italics.

In other words, if the median household income in your country is 10 bags of acorns a year, and you are trying to live in retirement on eight bags a year, as far as the OECD is concerned you’re in Fat City. You’re living on 80% of median income. You’re way above the “poverty rate.”

Good luck with that. Like I said, if you move to Kazakhstan be prepared to use an outdoor toilet. Average temperature in the country in January? Oh, about five degrees Fahrenheit.

Enjoy!

-Brett Arends

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03-02-24 1112ET

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