One of the miraculous things about the Obama candidacy is that we can support him for months--whether by giving, volunteering, standing on our respective internet soapboxes and shouting our views to the heavens, or merely voting--and then find out something new about him or his platform that makes us fall in love all over again.
Believe it or not, Obama has a serious plan to help restore Americans' confidence that old age will not leave them destitute. If the war incites my generation's outrage like nothing else, then surely the thought of what awaits us at the end of our working lives triggers our despair more than Armageddon itself (for us, after eight years of George W. Bush, Armageddon is the mere stuff of Will Smith movies).
Retirement is the issue so ugly for us that even the contemplation of it dispirits us before we even consider actual solutions. Thinking about it provokes a dread that overwhelms reason. Hope is pretty alien to this territory.
Many friends of mine around my age simply have no plan at all for retirement, and it's not because they're spendthrifts. It's because they are entering their thirties stuck in tempworld or in dead-end clerical jobs. Money that might otherwise be squirreled away goes to rent and inflated health care costs. Those that do have some kind of game plan are the ones who own their homes, and their ideas for their retirement future frequently seem to revolve around reverse mortgages or living off the proceeds of the sale late in life of that home--a strategy that just might work if they don't live too long afterwards.
And these are my healthy, college-educated, single gay friends in New York City. I'm trying not to think of what's going on with the friends I went to high school with in rural North Carolina, who are raising children and buying gas to get themselves to work and back each day on schoolteachers' and prison guards' salaries. How much are they able to deposit into their 401ks right now?
Ultimately, of course, it needs to be said that the fundamentals of this problem will be dealt with only when public policy with respect to employment is re-ordered so that government's goal is no longer maximum efficiency, with as little pay and benefits flowing to workers as possible relative to the amount of work coming out of them. Instead, we need to see a return to a economy of strong job-creation, labor-scarcity, and wage inflation. (The economic value of inflation, it needs to be said, depends on who is paying the higher prices, who's receiving the money from the prices, and what is being bought. Higher prices for a commodity extracted elsewhere like petroleum is bad. Higher prices for labor that go to bring unemployed or marginal workers into the middle class is good, even though these workers will have to absorb some of the costs of their own prosperity through the higher prices they'll have to pay. This is why by the way so many working class African American families in the south revere Jimmy Carter--because it was during his presidency they entered the middle class.)
But all that's a diary for another time.
Short of these major structural changes that we hope a President Obama will accomplish through trade reforms, investments in alternative energy and other muscularly progressive policies, the best we can hope for is a major effort to assist everyone in our society to save and invest for retirement. Of course, the older one is, the greater the necessity of starting work on the nest egg immediately. But for my cash-squeezed generation--mostly unable to save and loaded with multiple flavors of indebtedness, there's a special urgency too.
So it was with real fascination I read the CNN article this morning evaluating--albeit from a certain rightwing frame ("Uncle Sam Can Fund Retirement-Obama")--his proposal to assist with retirement saving and investing. First, it needs to be said that nowhere in these policies is anything done to privatize, partially privatize or weaken social security. Unlike some sound-alike proposals put forward by Bush, Obama's ideas do not deduct money from one's social security contributions. Instead, Obama builds a different, extra layer of federal assistance for retirement on top of what we are already promised under social security.
So basically there will be an automatic program whereby every worker who wants to participate can have 3% of his or her pay invested in a special low-cost indexed mutual fund. Moreover, if a family makes less than $75,000 a year that principal will be matched up to 50% by the federal government, with a ceiling of $1,000.
Currently, there is a Saver's Credit for individuals earning less than $25,000 and for couples earning less than $50,000. The Credit is currently available up to $2,000 a year, so that if you qualify and put $2,000 in an IRA that amount is subtracted from your taxes. But it's nonrefundable. So, and I want you to really think this, how much net income tax do you think most individuals making less than $25,000 a year actually pay? Like with the Child Care Tax Credit, the current policy places a very sharp limit on what individuals who need it most can get out of this program.
So what Obama's proposal does is to make this tax credit refundable up to $1,000, which comprises the federal match to the taxpayer's investment. It also expands the number of people who qualify to include most middle-class Americans.
So where does this leave lower middle class workers?
From barackobama.com:
Experts estimate that this program will increase the savings participation rate for low and middle-income workers from its current 15 percent level to around 80 percent.
From CNN:
Over time, the amount socked away in these IRAs could grow into a six-figure nest egg. A 30-year-old worker who contributed $1,000 a year and received the $500 match would accumulate $143,750 by age 65, assuming a 5% average rate of return after inflation, according to Ronald Wilcox, business professor at University of Virginia's Darden School of Business.
Someone who started saving at age 25 and earned a 7% average rate of return would have nearly $322,000 in the account at retirement, Goolsbee said.
"It's not chump change," Wilcox said. "It could make a real difference in their retirement assets and their ability to pay for their own retirement."
Finally, per CNN the Tax Policy Center says Obama's plan would set the federal government back $18.8 billion annually. What CNN would not say is that this is about the same price as two months of the Iraq occupation.
For details and more extended discussion, see:
http://www.barackobama.com/...
http://money.cnn.com/...
Finally, I would specify this is not Barack Obama's only proposal to help with retirement--see his plan to end the income tax for seniors making less than $50,000 a year and strengthen federal supervision of employer-provided pension funds.
So please spread the word about these retirement savings proposals of Barack Obama's. Not just to parents, grandparents and persons over 50 who we conventionally think of as having reason to be concerned about retirement. But to younger friends, co-workers and students as well, people who aren't concerned about retirement, are convinced that they'll never have the resources for retirement, or have basically already given up and decided to live fast and die young.
Tell them there's hope, and that this is what it is. And tell them to vote Obama.
Because the poverty they fight may be their own.