Thursday, July 24, 2014

HEINTZ: A unifying issue for Americans

By ANDY HEINTZ, For What It's Worth | 2/19/2014

For many media pundits and politicians, pitting the elderly against the “Millennial” generation has become all the rage.

The narrative is that the glut of federal money that will be spent on Social Security and Medicare in the coming decades will leave no money left to invest in spending aimed at creating a more prosperous future for our nation’s young people: investements in renewable energy, research and development, job training, renewable energy and infrastructure.

For many media pundits and politicians, pitting the elderly against the “Millennial” generation has become all the rage.

The narrative is that the glut of federal money that will be spent on Social Security and Medicare in the coming decades will leave no money left to invest in spending aimed at creating a more prosperous future for our nation’s young people: investements in renewable energy, research and development, job training, renewable energy and infrastructure.

This popular theme is not only divisive, it also distracts Americans of all ages from coalescing around progressive policies that most Americans would support. Furthermore, making Social Security and Medicare solvent for the distant future would be a boon not only for today’s elderly, but also for the young Millennials who want to avoid the cruelties of poverty when they no longer are able to work.

Instead of allowing themselves to be sucked into the old-versus-young narrative, Millennials should support expanding Social Security by raising or eliminating the cap on income subjected to the Social Security tax. Such an action would make the program solvent into the distant future.

And given the fact that 401(k) retirement programs and other defined-contribution plans have proven to be an unworthy substitute to traditional employer-defined benefit pension plans, Millennials also should support viable alternatives that are more conducive to supplementing Social Security income. Such stances would be to the advantage of people throughout America’s age spectrum.

Teresa Ghilarducci, a senior fellow of the think tank Demos, has proposed a Guaranteed Retirement Account, which would assist Social Security income by offering a universal system of individual accounts where investments are managed in pool savings with low fees and safeguards for individuals during downturns in the stock market. While I haven’t immersed myself in all the particulars of the program, surpassing the current 401(k) plans in helping people secure a stable retirement wouldn’t be too difficult a task.

Research has shown fees charged by 401(k) plans and mutual funds often are inflated beyond the actual costs of managing investments because financial firms have an interest in raising these fees that directly conflicts with the interests of their investors.

Unfortunately, most people don’t know about the hidden costs of their 401(k) accounts because fees are taken “off the top” of investment returns or share prices. However, a research paper by Robert Hiltonsmith of Demos, which was featured in a Frontline documentary called the “Retirement Gamble,” found that a median-income, two-earner family will pay $155,000, all told, in 401(k) fees. That represents about 30 percent of the total this family would have had, if it weren’t for the fees.

Since the traditional employer-defined pension plans have faded over time and defined-contribution plans have become much more prominent, the failure of the 401(k) experiment reaffirms the need to expand Social Security and reform our private retirement system.

Americans, both young and old, have a stake in making sure they have a decent quality of life after they retire.

Andy Heintz is a political commentator. He previously was a Herald staff writer, now a sports reporter at the Ottumwa Courier, Ottumwa, Iowa. Read his blog at http://www.orble.com/just-one-mans-vision/ and follow @heintz23 on Twitter.

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