Americans need saving, now more than ever.
The latest study by the Corporation for Enterprise Development shows that nearly half of us are living paycheck to paycheck, with less than $6,000 in savings for a family of four.
Numbers released this year show 34 percent of U.S. workers have no retirement savings of any kind, and, of those who do, the large majority have less than $25,000. A Wells Fargo survey conducted in October reveals that most workers expect to have to either labor into their 80s or never retire, staying on the job until they die.
As a nation, we are setting ourselves up for disaster. With an aging population who has little or no savings, an uncertain economy that relies almost exclusively on consumer spending, and an explosion of welfare spending that has increased, rather than decreased, poverty rates, we are facing a tsunami of the destitute without the means to provide for themselves in later life.
So what do we do about it? One initiative pitched last week by the White House is the “myRA” program, which would offer voluntary payroll deductions, through employers, into a Roth-IRA-type account. MyRAs would feature principal protection backed by the federal government; but, with no penalty for early withdrawal, minuscule interest rates that may not even keep up with inflation and no new tax benefits, the plan seems inadequate to entice the low- and middle-income workers it is supposed to help save.
Another option, touted by the Center for Retirement Research at Boston College, calls for either mandatory or automatic payroll deductions.
Yes, this would result in more saving, but we doubt the ability of political appointees or elected officers to prudently govern such a pool of money. In addition, by forcing saving, we sacrifice yet more of the personal freedoms our nation was founded to protect.
We are skeptical for another reason of a large government-program solution: Government itself is largely to blame for discouraging saving. Stimulus in the form of the Federal Reserve’s commitment to low interest rates and its quantitative-easing bond-buying spree have lifted the markets, but they also weakened many of the incentives for the general public to save.
Inheritance taxes punish savers by taking money — which has frequently already been taxed multiple times — from their children, and the oft-repeated promise that the government will rescue the poor — by raising the minimum wage, expanding welfare programs and subsidizing health care — has created a false sense of security that there is a stable safety net for the nonsaving public.
Make no mistake, this is a dangerous illusion. Government itself at every level is working with little or no safety net, spending beyond revenue as a matter of routine and doing nothing to correct precariously unfunded retirement promises and Social Security obligations. Those who expect a taxpayer-funded soft landing in the long run are likely to be rudely disappointed.
The good news is that we as individuals can save ourselves — by saving. We can dine out less, drive older cars, live below our means, as generations of Americans have. We can build a better nation for our children by setting aside money now so we won’t be a burden on them in the future.
It would be incredibly helpful if tax and economic policy rewarded this good, responsible behavior. Government should not be expected or mandated to save us from our own bad decisions, but we should both expect and demand government policy to work with savers, rather than against them.
— From the Orange County Register