A Lifetime Pension
or A Lifetime of Work

Today most workers in the United States are depending on their 401k accounts to provide them with a secure retirement along with Social Security. That is a big problem according to a PBS Frontline news broadcast in 2006. Here’s why.

1.To maintain a moderately comfortable existence in retirement, Frontline says a worker needs to have 80% of their pre-retirement income available after they stop working. For a worker who was making $40,000 per year, this would mean putting away nearly half a million dollars if they live 15 years after retirement.

2.Middle class workers almost never put this kind of money away. Jack Vanderhei of the Employee Benefit Research Institute says that in 2006 (before the financial crash) a majority of 401k participants had enough to last them 6 years after retirement. The Federal Reserve says that the average family savings in a 401k account is $29,000. To retire in comfort a worker would have to put around 17% of their pay into a 401k for 30 years. Boston College Professor, Alicia Munnell says less than 10% of Americans put in the maximum allowable.

3.Market volatility has devastated retirement accounts of millions of workers. National Semi Conductor retiree Winson Crabb told Frontline his 401k went from $120,000 to $52,000 because of market downturns. He was forced to return to work.

4.Workers are not trained to be investors, says Munnell. They are unlikely to know how to track market trends or shift investments. No corporate executive would allow the average baggage handler to handle their investments and yet that is what they are asking workers to do for themselves.

5.These accounts leak. Workers tend to use their 401ks as a “rainy day” fund or in emergencies. This means that over 50% of these accounts get degraded over time.

6.401ks have fees; investment, handling and maintenance fees. These fees are often as high as 3%. Often the employee is unaware of these fees.

7.The Pension Benefit Guarantee Corporation (PBGC) provides insurance for all Defined Benefit Pension Funds (like the frozen Northwest and Delta pensions). There is no insurance on 401ks. Employees are on their own.

In 1974 84% of an employee’s retirement, on average, was paid for by their employer. Today that figure is 49%. Corporations have been successful in shifting the burden of retirement from the company to the worker.

Delta’s pitch to workers has been: take charge of your future, own your own savings plan, get free money from your employer. But this rhetoric hides the fact that workers who have only a 401k will likely be working until they are no longer physically able or they die. Delta executive bonuses have kicked workers’ retirement to the curb.

There is an alternative. PMNW workers belong to the IAM Pension Plan. It’s safe, secure, guaranteed until you die and Delta pays 100% of the contribution. When we win representation, PMDL workers can enjoy the same benefit.