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Thursday, 24 October 2013 08:28

Personal Debt That Enriches Wall Street -- Not National Debt -- Is Greatest Threat to Retirees

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aretire10 24Whenever the elected political tools of the oligarchs trash Social Security, they tout 401(k)-type accounts and voluntary retirement savings programs.

There's many problems with such an Ayn Randian view of retirement (and even Rand hypocritically took advantage of the government mandated retirement programs -- as most of the Tea Party and Right Wing fanatics do despite their "principles"). But an October 23 Washington Post (WP) analysis gets right to the heart of a major flaw in the "everyone's responsible for investing in their own retirement without any government payroll investment programs such as Social Security" sloganeering.

The WP article is entitled, "Most Americans accumulating debt faster than they’re saving for retirement":

A majority of Americans with 401(k)-type savings accounts are accumulating debt faster than they are setting aside money for retirement, further undermining the nation’s troubled system for old-age saving, a new report has found.

Three in five workers with defined contribution accounts are “debt savers,” according to the report released Thursday, meaning their increasing mortgages, credit card balances and installment loans are outpacing the amount of money they are able to save for retirement.

The imbalance is expanding even as policymakers are encouraging people to set aside more by offering generous tax breaks and automatically enrolling workers in retirement accounts that in some cases automatically escalate the amount of money over time.

Does this devastating debunking of the promotion of an all voluntary retirement savings political strategy get worse? Oh yes, it does:

The HelloWallet report is the latest in an expanding line of research suggesting that the United States is facing a looming retirement security crisis. A growing number of researchers are concerned that the nation is on the cusp of a shift in which more Americans are on a track that will lead to a decline in their living standards when they retire.

The report says that debt is among the biggest culprits. The amount of money that households nearing retirement are dedicating to pay down debts has increased 69 percent over the past two decades, the report said. Households headed by people ages 55 to 64 now spend 22 cents of each dollar to pay off old loans — about the same percentage as younger people, the report found.

The problem is not confined to the poorest Americans, many of whom have no retirement savings. Most of the people with accounts who are accumulating debt faster than retirement savings are older than 40, college educated and earning more than $50,000 a year, the report said.

So the problem facing even non-Social Security dependent retirees is due to personal debt not national debt. What people owe money on are non-government expenses such as college, housing, cars, credit cards, etc.  This is private indebtedness that is contributing to a looming personal retirement shortfall of funds.

Ironically, Social Security is one of the few programs that is keeping most seniors from economic impoverishment, as meager as the average monthly check is. Olivia Mitchell, professor of economics and executive director of the Pension Research Council at the University of Pennsylvania’s Wharton School of Business told the WP, “Without automatic enrollment in retirement plans, many people would have been deeper in debt and probably facing larger retirement shortfalls than they would have without those automatic saving mechanisms in place."

Since the Reagan era, wages have been relatively stagnant in the United States as debt has risen.  It is indeed this growing personal (again not national) debt that has been a primary source of profit for the banks too big to fail.  Persons who owe large amounts of money are paying off interest at often exorbitant sums (think credit cards) while in many cases barely scratching away at principal.  This is all easy money for banks that are paying out literally .01 % on savings accounts.

So the banks pay out virtually no interest to the average American on what is now not really a savings account, but rather a virtually non-interest borrowing fund for banks to lend out a worker's money to another worker at double digit interest.  It's like stealing candy from a baby.

So, let this WP article be a mini-lesson on what the oligarchy and their minions on the Hill, such as Paul Ryan, have been up to. Since the Reagan era, they have been promoting policies that increase personal debt while stagnating wages (except for themselves, of course).  In turn, a likely majority of the 99% has to go into debt and borrow money at high interest rates, while those who save receive virtually no interest on their savings.  This, in turn (except for Social Security) limits what they can save for retirement.

Then the financial titans sponsor think tanks and give campaign contributions to blame "entitlements" for all the personal indebtedness which has fueled their profits.  So, if a "grand bargain" of Social Security and Medicare cuts are enacted, the elderly become indebted and poorer, while the Wall Street barons make even a greater profit from increased borrowing as the national debt is lowered in the name of "austerity" (without revenue increases in the form of higher progressive taxes on the rich).

It's not an economic policy that the plutocracy is promoting; it's a stealing from the working class and poor scam to add billions to the likes of the 400 richest families (and the rest of the 1%'ers) who have assets equaling the entire bottom 50% of Americans.

It ought to be a crime, because it is a sophisticated form of theft.

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(Photo: StockMonkeys.com)