In my former role as a Trustee for the Maryland State Retirement and Pension System (MSRPS), it was my privilege to attend a number of conferences on the public policy aspects of retirement for public employees. During those conferences, it became increasingly apparent that retirement is an issue of social justice not just for public employees, but for everyone who works for a living.
It should be an inherent interest of the state to ensure that senior citizens do not become wards of the state when that day arrives when working for a living is no longer possible. Since America is “graying” at a prodigious rate, with an estimated increase from the current 46 million citizens over 65 to 98 million by 2060, and absent any changes in our national politics, Social Security, alone, will be unlikely to provide even the basic protections available today.
At one of those conferences at the Harvard Business School, a Trustee asked a panelist “What is the one piece of advice you would give to every American regarding the preparation for retirement?,” Without skipping a beat, the panelist responded, “Save and invest fifteen cents of every dollar you earn from the time you start working until the day you retire.”
There is a measure of wisdom in that response, but it does not address the chronic issue of a workforce that has shared inadequately in the wealth of this nation. The suggestion to a worker subsisting on today’s unlivable minimum wage that he is not saving enough will likely result in derisive laughter.
Also, we live in a nation where consumerism has transformed itself into patriotic duty and instant gratification into the lifestyle of choice. The average family has $6,375 of credit card debt up 3 percent just last year, and total credit card debt surpassed $1 trillion in 2017 according to a report issued by CNBC in January. Every cent Americans spend in interest payments on disposable consumer goods draws down on the potential assets that could be set aside for retirement.
Short-term debt and the assumption of interest payments into the household budget work in the best interest of the money-lenders and against the long-term interests of the debtor. When will students saddled with student loan debt begin to prepare for retirement?
Finally, here is the last lesson gleaned from my five years as a Trustee. For reasons too numerous to treat in this space, the returns for large institutional investors tend to exceed the returns of small investors, but chief among those reasons is the mentality of buy-and-hold for the distant future instead of short-term trading for an immediate profit.
We need to look no further than the economic crisis of 2008-2009 to see that small investors took a $2.4 trillion bath in the stock market while large investors gained $2.4 trillion by betting against the economy. Well-diversified portfolios in state-sponsored retirement systems suffered too, but they weathered the economic storm while many small investors have yet to fully recover from what has been labeled as the Great Recession.
The partisan divide in Congress makes it more likely that conservatives would let Social Security die rather than take any of a half-dozen simple solutions that would shore it up for decades to come. Instead, perhaps it is time for Maryland to pass The Retirement Security for All Act and create a structure parallel to the MSRPS for private employers and employees to manage deferred income in preparation for the inevitable age-of-decline.
Why? More frequently than not, money management and investments are better left to professionals rather than amateurs, and institutional investors are always better prepared to ride out a crisis than are individual investors.
Such a program would certainly need to happen in conjunction with a move toward more livable wages. However, in a nation where a majority of Americans have access to less than $1,000 in savings, and most live perilously close to paycheck-to-paycheck, it is imperative that we become a nation of lifelong savers rather than, as the old song goes, just getting another day older and deeper in debt.