book, 95 pages, 6" x 9" (paper), 2002
Over the last few decades, coverage of American workers by traditional pension plans has given way to coverage by defined contribution plans - 401(k)s, IRAs, Keoghs - that leave the investment decisions and the risks in the hands of the worker. What has this changing composition of retirement wealth meant for expected retirement income? Between 1989 and 1998, a period of strong economic growth and a booming stock market, the share of households headed by a person approaching retirement age that could expect an adequate income in retirement actually declined. Fewer will have enough income to cross the poverty line, and fewer will be able to recoup a quarter, half, or three-quarters to their pre-retirement income. These frightening trends make clear that the growing system of voluntary accounts in the United States has produced greater inequality between rich and median households and declining retirement wealth for the typical worker. As a first step for public policy, pension coverage needs to be improved, and retirement wealth for the majority of households needs to be raised. Until then, as long as a substantial share of future retirees lack adequate resources, it seems prudent for policy makers to keep Social Security intact, rather than subject it to the risks of privatization.