In his recent weekly address, President Obama outlined some proposed changes regarding retirement savings. I think all four of the proposed actions/changes are excellent, but that’s not what interests me most about the speech.
What I can’t get past is this quote:
“If you work hard and meet your responsibilities, this country is going to honor our collective responsibility to you: to ensure that you can save and secure your retirement.”
It’s our country’s responsibility to ensure that you can retire?
Imagine for a moment if, instead of speaking about “our collective responsibility to ensure that you can save and secure your retirement,” Obama had spoken about “our collective responsibility to ensure that you can save and buy a second home, preferably somewhere near a body of water.”
It would sound ridiculous, right? Yet neither retirement nor buying a second home is a basic human need. Each one is simply a life/savings goal that a given person might or might not have
Our government (and society at large) seems to assume not only that everyone wants to retire, but that everyone should be able to retire.
I disagree wholeheartedly with the first assumption, and the second one doesn’t make much sense to me either.
Why should retirement be an entitlement? Why not the above-mentioned second home? After all, ensuring that every American can buy a second home would probably cost less than ensuring that every American can retire.
Why retirement instead of any of a hundred other generally desirable things? For instance, why not set up a series of laws and tax incentives to ensure that every American gets the chance to travel the world?
It’s ‘not’.
Social Security is meant to be insurance, not a retirement plan.
In those days, people worked till 62 or so, but died soon after. With the good fortune we have, the care that helps us live longer, we have an odd problem, too many years of no work. The government shouldn’t be the guarantor of our happiness or retirement.
The whole entitlement angle is 100% politics. Social Security was never set up to be a retirement plan, but a supplement for lost wages due to old age. The politicians have ridden the wave on this for decades. I believe this is what is meant by the term “New Deal Coalition”. Social Security is the bedrock of that coalition.
Excellent post.
I think you mis-read the statement. “If you work hard and meet your responsibilities, this country is going to honor our collective responsibility to you: to ensure that you can save and secure your retirement.” (emphasis added). The entitlement is the ability to *save* and then secure your retirement. If you don’t save or don’t save enough, you are not going to secure your retirement.
The collective responsibility is already fulfilled. Nobody is barred from saving their own money. Some can do it more easily than others, but everybody can save.
TFB: My hang up is on the “secure your retirement” part. (Or perhaps it’s on the “and” as silly as that may sound.)
I think it makes sense to ensure that you can “save toward your retirement” or even “save toward securing your retirement.”
To me, that seems very different from ensuring that you can “save and secure your retirement.”
“Government is the great fiction through which everybody endeavors to live at the expense of everybody else.” – Frederic Bastiat
Yet another example of Obama pushing the concept of Socialism. It is not, nor has it ever been, the country’s responsibility to ensure that its citizens can retire. The term we should be focusing on is “personal responsibility.” If you can manage your money, manage your investments, and save enough to retire, then congratulations.
Any idea that the government somehow needs to facilitate this is absurd. Social Security is still a relatively new concept ( started in the 1930′s i believe ), and was never meant as a full-scale retirement program. More of a “so you don’t starve to death” kind of thing.
Mike,
I’m with TFB on this one. The entitlement is: if you work, earn a living, pay your taxes, and meet your responsibilities, you ought to be able to generate savings.
Use those savings as you will. Perhaps spend them all along and not have any savings. Perhaps buy that 2nd home. But one of the choices is to save for a retirement. Your ability to save, and just how much you have available to save, determines the quality of that retirement. No one is suggesting that everyone is entitled to a lavish retirement. Just the possibility of saving enough to get by. This does NOT mean that social security payments are supposed to be sufficient.
It’s not retiring that’s an entitlement. It’s the ability to earn enough above poverty levels to be able to accumulate savings.
The problem with Socialism is that your always running out of other peoples money.
Thatcher
Hm, I think people may have misunderstood what I meant.
To stress, I think the changes he proposed in the speech are absolutely great.
My only issue is with his phrasing. To me, it just seems to highlight the idea that retirement is both assumed as a goal, and assumed as attainable.
Why this one particular goal has been chosen over any number of others seems arbitrary to me.
And for reference, in case anybody has forgotten, the prior president operated on precisely the same set of assumptions regarding retirement. This particular issue isn’t a “one party vs another” issue. It seems to me to be more of a “financial services industry vs. the rest of us” issue.
Who is stopping anyone from the ability to save?
Who is stopping anyone from pursuing a career that is economically beneficial?
Nobody.
It’s all politics. No substance.
It seems that everyone now believes that they are entitled to 20+ years of leisure at the end of their lives. Why is the government legislating to ensure that everyone has the ability to enjoy this leisure, even though it has only entered the popular mindset fairly recently (were retirement and pensions possible or popular before the 20th century)?
The government will never be able to legislate effectively it it has an incorrect world view.
TFB and Mark: Let’s assume your side for a moment. How can the gov’t secure our ability to save and retire if they are taxing us left and right? Will the gov’t decide that $1MM is enough for me and take the rest so that someone else can also have $1MM? Will the gov’t be deciding what is “enough hard work” and will they decide what my responsibilities are?
I’m with Mike. The gov’t should be ensuring that we keep as much as possible of what we earn and work hard for. They can ensure that with low taxes. What I would do with that is my business. They should not be using taxes to redistribute wealth to others.
Retirement Savior–That’s the core issue right there, thinking you can work for 40-45 years to fund a 20-30 year non-working life. Inflation alone makes that prospect very dim, but it’s a popular one that people don’t want to let go of.
In truth, only the wealthy (multi millionaires) will be able to fund a 20-30 year period of full retirement. So the next question is: how many people will be millionaires by the time they hit 65? The statistical evidence isn’t encouraging.
Second career planning should be an essential part of post-65 financial planning, yet the subject is almost invisible behind the rosy promises of perpetual 10-15% stock market returns. Is anyone developing a Plan B???
Great post and excellent insight into that quote. When you get people en masse to believe that you are entitled to something like retirement you start seeing the deterioration of savings and personal responsibility.
Could it be that “entitlement” leads to a potential downfall of America?
As usual, I’m late to the party. But I have to echo the excellent points of ChrisCD and Retirement Savior:
1. The best way government can ensure we have the opportunity to save (notice I didn’t say “ability” to save – we all have that inherently built into each of us) is to reduce our taxes as low as possible; taxes and the capacity to save are inversely related to one another.
2. Yes, an uncomfortable chunk of people now believe they are entitled (there’s that word again) to 20+ years of comfy cozy retirement. Keep in mind when Social Security was enacted, the average life expectancy was not too far above the 65 year old retirement age. That is not the case today.
Just wait until Obama’s massive spending spree begins to catch up with us (and it will – just like the housing mess). The resulting high inflation (or worse, hyperinflation) will absolutely decimate the great majority of retirement savings accounts that are conservatively balanced.
By then it will be far too late for anybody who has already retired to ever recover.
My advice to anybody approaching retirement: don’t. Employment is an excellent financial defense in times of high inflation.
Cheer up. At least we’ll all have government provided health care by then!
Great post!
My $0.02 (after taxes)
Len
Len Penzo dot Com
“Keep in mind when Social Security was enacted, the average life expectancy was not too far above the 65 year old retirement age.”
From what I’ve read, it was actually 62.
Exactly, Mike.
Len
Chris
Your stated view of how taxation works is far removed from reality. The money is not spent to redistribute wealth (a convenient distortion of the truth). The government provides services and protection from harm.
“The gov’t should be ensuring that we keep as much as possible of what we earn and work hard for. They can ensure that with low taxes. What I would do with that is my business. They should not be using taxes to redistribute wealth to others.”
Why? Because you say so? Living in the USA is a privilege. Giving something back is a decent idea and it is not unreasonable for those who gain the most by being able to live and work here ought to contribute something that benefits the entire nation; the nation that gives them the chance to work hard and succeed.
You seem to want want low taxes, but you support very costly government expenditures:
I know you just love the Iraq and Afghanistan wars.
As one example (I’m not a big supporter of this idea, it’s just an example. An example not to be argued in this forum): Don’t support those government jobs that are extremely costly and return almost nothing to the taxpayers: such as spending untold fortunes fighting drug trafficking, and placing people in prison for minor offenses, when legalizing drugs would cut spending drastically and the sales taxes alone (from legalized sales) would go a long way towards solving the deficit problem. We could then spend money on helping people kick the habit.
Yeah, I think the quote is misunderstood out of context. Remember the initial aims and uses of social security, that’s what he meant as the collective responsibility – if it’s broken, the ponzi scheme is realized. If it’s continued, it’s a ponzi scheme “in theory” only (or a “functioning” ponzi scheme, if you prefer). I’m not making a value judgment with that phrase – it’s just how it’s set up.
People can “save” all they want for when they’re 80 and too frail to do much other or much more work – but government monetary policy ensures that mere savings will be eaten away through inflation. Hence this is also another indirect “responsibility” of social security – which itself will be eroded by inflation. It’s not socialism 2009. It’s how the heck do you deal with a ponzi scheme in an ethical way? Or, shouldn’t you feel bad that the citizens have been cheated out of so much of their earnings their whole life? Folks are just getting their money back (after inflation), that’s all. You’ve already paid for it!
Not sure if my comment went through or not…. that stupid and self-contradictory Thatcher quote above is completely meaningless in today’s context, btw.
Yeah, my comment didn’t go through – unfortunate – just had some thoughts re: how the quote can be misunderstood out of context. Basically social security is like the taxes you pay throughout the year – don’t you want to get your money back? Isn’t that the promise of collective responsibility he’s trying to adhere to? If social security is stopped (but don’t ask me how they can continue it, either) – people will be cheated out of money they’ve paid. But it looks like the U.S. is not going to have a lot of choice, unless China (hmm, a socialist country with more real wealth than the U.S.) keeps bankrolling the daily operations of U.S.
In reply to some of the comments above: I’m not making a case here for lower taxes, nor a case against entitlements in general. (Nor am I making the opposite case. That just wasn’t the point of this post.) Rather, I simply think that selecting retirement as an entitlement is rather arbitrary and that perhaps it should be reconsidered.
I agree with tfb, if merely from a grammatical standpoint. The sentence quoted states “to ensure that you can save and secure your retirement.” I don’t think that implies (nor should one infer) that the government will secure your retirement just because you save. Break down the phrase, and it would read “to ensure that you can save and that you can secure your retirement.” Now, while I have a very real problem with the substance of such a claim (even with average savings rates going from below sea level to, maybe, 5%), I wouldn’t read more into what he said than what he said.