Bill to set up CalPERS-like plan for private employees
Valarie Martin is in a bind - she can't save for retirement because she is self-employed and can't find a full-time job with a retirement program.
"I'm looking at working until I die," said Martin, 59, a longtime teacher who now tutors children in Sacramento. "I'm barely making ends meet right now on less than $1,000 a month so saving for retirement is pretty much out of the question."
A single mother who now lives with her grown children, Martin formerly worked as a teacher in Richmond and in Amador County. The UC Berkeley graduate hopes to find a full-time job that would allow her to save a little for retirement.
"I know I should be thinking about my retirement, but getting back on my feet right now comes first," Martin said. "I used to be pretty good at saving, but that's easier when you have a decent full-time job."
Almost daily, we hear stories of the crisis stemming from the breakdown of the three-legged stool of retirement: tradi-tional pensions, Social Security and individual savings. For the majority of Americans, one leg of the stool is already gone - a traditional pension. Its replacement, the 401(k), may tip the stool - and millions of retirees - into poverty.
401(k) plans decimated
Between September 2007 and December 2008, IRAs and 401(k) plans lost a combined $2.8 trillion, or 47 percent of their value. Retirement experts find that 401(k) plans are burdened by high operating costs and low investment returns. Defined contribution plans alone simply do not provide retirees with guaranteed retirement income. As an article in U.S. News and World Report earlier this year noted, a survey of 401(k) managers revealed that even they concede that workers can't afford to retire on the proceeds from a 401(k) plan.
If employees don't make the right contributions into the right investment mix at the right time, they are at high risk for future poverty. In their spare time, average working families are expected to plan and manage retirement savings - tak-ing on the complex work of professional money managers.
We need to explore new innovative retirement models that provide guaranteed retirement income for all workers if we are going to be a country where, once again, working people can reasonably expect to be able to retire.
SB 1234: a good start
This year, state Sen. Kevin De León and Senate President Pro Tem Darrell Steinberg introduced SB 1234, which would allow private-sector workers to enroll in a modest, state-operated retirement program similar to CalPERS.
SB 1234, which passed the state Senate by a vote of 23 to 13 on May 30, is a step in the right direction. Traditional pensions, like CalPERS, work because professional managers use the average life expectancy of their participants for their investment time horizon.
We should look at what has worked well with traditional pensions to help more Americans avoid a retirement of poverty. After all, shouldn't retirement stories come with happy endings?
If people work hard their entire lives, they should be able to count on some stability so that they can retire with dignity and have a secure retirement. People like Valarie Martin, who raised four kids and put herself through college, should not have to work until they die.
For more information on SB 1234 and the fight for retirement security go to seiu1000.org. If you want to help all workers obtain a secure retirement, contact Ann Skaggs at firstname.lastname@example.org