The End of Retirement

The U.S. Department of Labor's Monthly Review has published an article by Teresa Ghilarducci, a teacher of economics at Notre Dame University and a visiting professor at the New School for Social Research, about the signs of the end of retirement all around. She argues that "the changes in the retirement future of Americans stem from the decline of union contracts, a dramatic shift in presidential and congressional attitudes about government responsibility for social insurance, and the substitution of defined contribution or 401(k)-type accounts for traditional defined benefit pensions."

Twenty years of experience with 401(k) plans reveal that workers will never be able to accumulate enough assets in individual accounts and choose payout options that will provide a steady stream of income for life after retirement. This means that Americans will turn to the option that American adults have always relied on—contingent, low-paying jobs—and will lose one of the few remaining accomplishments of the American working class, retirement.

However, given that defined contribution plans are here to stay, she believes taht there is barely a regulatory framework in place to protect the public interest. She suggests that sensible protections that already govern the investment behavior of defined benefit plan fiduciaries could be a good place to start, including limiting the percent of a portfolio that is allowed to be in the employee’s company’s stock, banning lump sum payments, and mandating worker representation on pension boards.

Source: "The End of Retirement" Monthly Review (May 2006)