No doubt many of you saw this DK diary about the recent study by the National Institute on Retirement, "The Retirement Savings Crisis: Is It Worse Than We Think?". Local P-D business writer David Nicklaus had this blog post on the NIR study, which had two statements that self particularly noted:
(1) "....Americans won't accept any proposal that really forces them to save."
(2) "In Australia, employers must sock 9 percent of nearly every worker's paycheck into a retirement account."
More (sort of) below the flip....
Nicklaus doesn't really delve into the mindset about pre-flip statement (1), but most people on this site understand that instinctively or can figure it out. It obviously derives into the latent streak of libertarianism and mistrust of government that is widely present through the US, the hate-soaked attacks by wingnuts and other related anti-intellectual bigots on the ideas of the "nanny state" and "big government". It's basically a larger expression of the attitude that invites ridicule of "eat your vegetables, they're good for you".
The NIR report by Dr. Nari Rhee doesn't address this question either, except perhaps a bit guardedly in this passage from the report:
"Some observers discount the size of the gap in employer-sponsored retirement plan access in official statistics by arguing that employers that do not provide retirement plans are merely accommodating the voluntary preferences of employees who are not 'focused on' retirement savings because they are young (e.g., below age 30), are lower income, or work part-time."
However, Dr. Rhee then gently wades into "nanny state rhetoric" territory ever so gently:
"However, insofar as workers have a lack of desire to contribute to a retirement plan under current circumstances, this should not be confused with the lack of need to accumulate retirement assets, whether through a DB pension or a retirement account."
We then come to quote (2) from Nicklaus, about Australia's system, where he further noted:
"This mandatory savings system has been in place since 1992, and 90 percent of working-age Australians have an account. That's twice the rate for Americans."
The website of the Australian Government Treasury has
this page on their Retirement Income System. The passage specifically about the mandatory 9% contribution by employers that Nicklaus referred to is mentioned on the Australian page thus:
"The Superannuation Guarantee was introduced in 1992 and the ten-year phase in of the Superannuation Guarantee minimum contribution rate was completed on 1 July 2002 with the rate now at 9 per cent. The coverage of superannuation in Australia has grown significantly as a result of the introduction of the Superannuation Guarantee system. The latest estimates show that 98 per cent of employees with leave entitlements and 72 per cent of casual employees are covered by superannuation.
The Superannuation Guarantee directs some of an employee's current remuneration into improving their standard of living in retirement. The current rate of 9 per cent provides a balance between employees forgoing current consumption for increases in living standards after retirement. On this basis the Government is not inclined to increase the rate. Increasing the rate would impact most on lower income earners through a reduction in the possible growth in their real take-home pay."
Getting back to our supposedly "freer to choose" system, Nicklaus further wrote (as Dartagnan also commented on at the end of his/her diary):
"No one in U.S. politics talks seriously about an Australian-style mandate, but Sen. Tom Harkin, D-Iowa, proposes requiring employers to offer what he calls a USA Retirement Fund.
Workers could opt out, but if they don't, some portion of their salaries would go into a pooled investment fund.
This is a mild form of paternalism compared to Australia's mandate, but Harkin's plan has little political momentum."
Speaking of paternalism, you might also want to remember that in Australia,
voting is mandatory. If you're an Oz voter, you're fined if you don't vote, which makes it interesting for Aussie backpackers traveling throughout Europe, among others, around election time. (BTW, in a true and not debased "fair and balanced" situation, the Australian Election Commission has
this page on arguments for and against mandatory voting.) With voting, in the US, this kind of compulsion would be anathema, again for reasons noted at the beginning.
There may be other reasons behind Americans' lack of saving, retirement and otherwise, which I remembered from a past NYT commentary with the provocative headline "Maybe Saving Money is Just for Chumps". For example:
"Taxpayers have had decades to notice that the income tax system, which penalizes working and saving by taxing the earnings from each, is yet another good reason not to save.
In a rational world, we would have a progressive consumption tax that would penalize high levels of spending instead of earning and saving."
Nicklaus repeats his one point at the very end of his blog post, regarding retirement savings:
"Americans may know they should save, but they don't want to be forced to do it."
On the whole, though, would it be any better or worse for us if we were? I don't know. (If 3CM knew, he wouldn't be a loser, would he?)
Speaking for myself, I know that I'm pretty tight with money, most of the time, even though I splurge occasionally, not to mention be $0.01-wise and £-foolish at other times. And yes, I do have a 401k, which may or may not be "part of the problem", depending on your POV. (No, I'm not going to say how much I have socked away. Suffice is to say that it's more than $3K or $12K, per Nicklaus' citation of the report.)
So no easy answers here, to be sure. Just something to think about while whiling away your Saturday night, should you choose to stop by and observe the usual SNLC protocol, namely your loser stories of the week.....