So, the 401k equivalent for non-profit workers is the 403b. Non-profit workers are typically paid a pittance for doing “god’s work” (I’m an atheist, so that why the quotes, but for real: non-profit staff bust their asses holding up the most vulnerable in our society in most cases. Like teachers and nurses, they should get the respect and the pay that is commensurate with their value. Off soapbox!). Many don’t even participate in their organization’s 403b plan because they are living on razor thin margins and don’t see the value in investing even $5 or $10 a paycheck. At my last agency (I was an exec), we grappled with whether to make our 403b an automatic enrollment plan from a person’s hire date as opposed to having staff opt-in, which typically lead to low enrollment. We instituted a matching contribution, and we didn’t want staff to lose out on that free money, but we weren’t sure if forcing enrollment was paternalistic (staff automatically enrolled could later opt-out if the chose to).
My whole point is it would be interesting and probably gut-wrenching to do a similar piece on what the median 403b account has in it at retirement age. So many of these staff truly can never retire. It’s heartbreaking.
I can only imagine how much lower it is for non-profit workers. But you hit on the big point. Pensions, or direct benefit plans, were paid for by the employer. Defined contribution plans (401ks and 403bs) allow workers to defer their wages. This forces the worker to make a choice between getting the money now or later. It's a lose-lose in far too many cases.
I love you were able to get this great Empower data! And how you perfectly explained the concept of median vs. average.
I'm a fan of Cuban so I'll just say, I think some mix of paternalism and "personal responsibility" is best. I did read in a separate article that among "millionaires next door," in the top five occupations were teachers, who have super powerful unions and excellent pensions. I forget the exact figure but in the same article, it also said a substantial percentage of these millionaires next door never made a 6-figure annual salary in their entire careers.
So this is leading me to believe, it's a blend of government policies plus good old fashioned living within one's means and having some financial literacy, that could have the best chance of succeeding.
P.S. TY for the school supplies especially the two ✏️✏️! I let my kid have one cuz she just loved the message printed on them and so do I (Not gonna spill what it says, so peeps have to be a paid subscriber to find out 😉)
I agree that it's totally necessary for one to live within one's means. No matter what economic system we have, that's always going to be good advice. Where it troubles me is when it's used to block criticism of company/government policies. If everyone had great pensions that gave them enough money to live, and a retiree went out and spent all their money on the casino, that would be the individual's fault, not the system. But as I see it now, the system is designed to push wealth towards the top and away from the workers, which is why I think the "personal responsibility" is a red herring.
I'm so glad you like the pencils! I'm thrilled to hear it!
"...the system is designed to push wealth towards the top and away from the workers..."
Just to double-click on this; I agree 100%, and that's a large part of why I'm so bullish on labor fighting for massive gains in 401k plans- specifically a fixed contribution. We can talk about the (IMO) necessary systemic overhauls needed in the US, but this is one of the quickest ways to slow that upward wealth transfer.
Yea I totally see your point! I guess it comes down to, "What can we get now vs. what we can get later?" - the perpetual problem facing leftist politics.
Let's see, your CEO is making billions, the shareholders are gambling with your money, the government is taxing you three ways from Sunday and literally printing inflation, but you worker aren't working hard enough and you're drinking too many lattes. Got it.
I often wonder how much people like Cuban believe their own BS. On one hand, he's a smart guy who pays attention to economic conditions, so he must know it's impossible for a minimum wage worker to keep their head above water. On the other hand, guys like him tend to buy into the premise that they are *actually superior to everyone else, and if everyone just saved money the world would be without problems.
I agree that our current system isn't working, and that "personal responsibility" is often used as an excuse, completely unjustified.
I would urge caution about more comprehensive pensions, though. NY City very nearly went bankrupt, and had to claw back a generation's worth of benefits and advances to survive. I'm not saying it's a bad idea, just that we have to be really, really mindful about how we avoid catastrophic unintended consequences.
Great stuff to think about! I'm glad you're writing about this.
I'll have to check out that NYC story! I do think there's a difference between public job pensions (NYC) and those provided by private companies. Not that publicly employed workers deserve less, but because public entities (states, cities, etc.) have other important duties while private companies only exist to create profit.
This isn't to say public workers shouldn't get pensions, just that they need to be addressed in a larger context of how we allocate our social spending.
You might really enjoy "While America Aged" by Lowenstein. It's exhaustive, but he covers both private and public pension funds quite a bit in there.
If you know me by now, you know my thing is just to look before we leap, and to consider the trade-offs. We've gone way, way too far toward capital and away from labor, and we're seeing things begin to come unglued because of this. The income and wealth inequality have to be addressed, lest we end up in a revolution (or reactionary government, more or less same outcome).
We just don't want to rush into a solution that will create (somehow) even worse problems in 10 or 20 years. It's all so complicated!
I totally agree with the look before you leap philosophy, especially when trying to drive societal change. If you mess up a serious shift, people are going to be convinced what existed before was better!
And thanks for the recommendation, I'll add it to my list!
You bet, Joe. And I feel like we see eye to eye with that: we don't know everything, what we are trying to understand is immensely complicated, but we can make some aspects simpler for our readers. That's what it's all about!
I'm going to respectfully push back here. Labor should be pushing first for the highest fixed contributions possible, and industry-leading matches second.
We talked about it before, but unions went "all in" on using pension funds as investment vehicles. They are completely beholden to these plans, and will cast off just about any article in a CBA (including scope) to keep them. Companies know this and continuously weaponize DB plans, holding them over workers heads like a sword of Damocles.
The idea of a "career" has changed over the last 20 years. We can talk about why that is separately, but the reality is, no one's staying in one spot for 20,30,40 years anymore. Even if they want to stay at the same company, they might want to move around between divisions. A DB plan handcuffs them. With a 401k, all that leverage goes back to the workers.
And for those that decide to move on to a new job? The money should go with them. That doesn;t happen with a pension.
For those that kickoff early (God forbid)? There shouldn't be a penalty for having your spouse/partner assume the plan's benefits, but that's exactly what happens.
Labor activists talk a lot about "worker empowerment" while advocating plans that have an opposite effect. We need to change that.
Source: Almost 30 years in aviation, with 2(!) frozen pensions and a 401k.
I agree that unions have not handled pension negotiations well in the past (that's one of many things they've done wrong!), but I disagree on the idea we should steer towards defined contribution plans. Under the current career track of employees moving between workplaces, they may have a theoretical benefit of "going with the worker," but I fail to see how that empowers the worker if it's still not enough to live on at their retirement.
The "old school" pension might not exactly fit the mobile workforce of 2023, but I think the solution there is to tinker with the structure of pensions, not the inadequate DCPs. Perhaps there could be a structure in which workers could collect partial DBP payments from workplaces as they move between them. So it wouldn't be one company paying the whole thing, but each they've worked for over the course of their lives.
Great comment Kevin, I can see this happening with the auto workers rn in Detroit. The days of working at one company for the 40 or so years after post-secondary education, and then retiring with a paid-off house and gold Rolex, were over long before us Gen X started working.
Your suggestion of having higher contribution limits is spot on! And they need to make the "catch-up" contribution limits for retirement accounts higher as well.
So, the 401k equivalent for non-profit workers is the 403b. Non-profit workers are typically paid a pittance for doing “god’s work” (I’m an atheist, so that why the quotes, but for real: non-profit staff bust their asses holding up the most vulnerable in our society in most cases. Like teachers and nurses, they should get the respect and the pay that is commensurate with their value. Off soapbox!). Many don’t even participate in their organization’s 403b plan because they are living on razor thin margins and don’t see the value in investing even $5 or $10 a paycheck. At my last agency (I was an exec), we grappled with whether to make our 403b an automatic enrollment plan from a person’s hire date as opposed to having staff opt-in, which typically lead to low enrollment. We instituted a matching contribution, and we didn’t want staff to lose out on that free money, but we weren’t sure if forcing enrollment was paternalistic (staff automatically enrolled could later opt-out if the chose to).
My whole point is it would be interesting and probably gut-wrenching to do a similar piece on what the median 403b account has in it at retirement age. So many of these staff truly can never retire. It’s heartbreaking.
I can only imagine how much lower it is for non-profit workers. But you hit on the big point. Pensions, or direct benefit plans, were paid for by the employer. Defined contribution plans (401ks and 403bs) allow workers to defer their wages. This forces the worker to make a choice between getting the money now or later. It's a lose-lose in far too many cases.
I love you were able to get this great Empower data! And how you perfectly explained the concept of median vs. average.
I'm a fan of Cuban so I'll just say, I think some mix of paternalism and "personal responsibility" is best. I did read in a separate article that among "millionaires next door," in the top five occupations were teachers, who have super powerful unions and excellent pensions. I forget the exact figure but in the same article, it also said a substantial percentage of these millionaires next door never made a 6-figure annual salary in their entire careers.
So this is leading me to believe, it's a blend of government policies plus good old fashioned living within one's means and having some financial literacy, that could have the best chance of succeeding.
P.S. TY for the school supplies especially the two ✏️✏️! I let my kid have one cuz she just loved the message printed on them and so do I (Not gonna spill what it says, so peeps have to be a paid subscriber to find out 😉)
Thanks for your encouragement!
I agree that it's totally necessary for one to live within one's means. No matter what economic system we have, that's always going to be good advice. Where it troubles me is when it's used to block criticism of company/government policies. If everyone had great pensions that gave them enough money to live, and a retiree went out and spent all their money on the casino, that would be the individual's fault, not the system. But as I see it now, the system is designed to push wealth towards the top and away from the workers, which is why I think the "personal responsibility" is a red herring.
I'm so glad you like the pencils! I'm thrilled to hear it!
"...the system is designed to push wealth towards the top and away from the workers..."
Just to double-click on this; I agree 100%, and that's a large part of why I'm so bullish on labor fighting for massive gains in 401k plans- specifically a fixed contribution. We can talk about the (IMO) necessary systemic overhauls needed in the US, but this is one of the quickest ways to slow that upward wealth transfer.
Yea I totally see your point! I guess it comes down to, "What can we get now vs. what we can get later?" - the perpetual problem facing leftist politics.
Let's see, your CEO is making billions, the shareholders are gambling with your money, the government is taxing you three ways from Sunday and literally printing inflation, but you worker aren't working hard enough and you're drinking too many lattes. Got it.
I often wonder how much people like Cuban believe their own BS. On one hand, he's a smart guy who pays attention to economic conditions, so he must know it's impossible for a minimum wage worker to keep their head above water. On the other hand, guys like him tend to buy into the premise that they are *actually superior to everyone else, and if everyone just saved money the world would be without problems.
I agree that our current system isn't working, and that "personal responsibility" is often used as an excuse, completely unjustified.
I would urge caution about more comprehensive pensions, though. NY City very nearly went bankrupt, and had to claw back a generation's worth of benefits and advances to survive. I'm not saying it's a bad idea, just that we have to be really, really mindful about how we avoid catastrophic unintended consequences.
Great stuff to think about! I'm glad you're writing about this.
I'll have to check out that NYC story! I do think there's a difference between public job pensions (NYC) and those provided by private companies. Not that publicly employed workers deserve less, but because public entities (states, cities, etc.) have other important duties while private companies only exist to create profit.
This isn't to say public workers shouldn't get pensions, just that they need to be addressed in a larger context of how we allocate our social spending.
Yes, I agree completely.
You might really enjoy "While America Aged" by Lowenstein. It's exhaustive, but he covers both private and public pension funds quite a bit in there.
If you know me by now, you know my thing is just to look before we leap, and to consider the trade-offs. We've gone way, way too far toward capital and away from labor, and we're seeing things begin to come unglued because of this. The income and wealth inequality have to be addressed, lest we end up in a revolution (or reactionary government, more or less same outcome).
We just don't want to rush into a solution that will create (somehow) even worse problems in 10 or 20 years. It's all so complicated!
I totally agree with the look before you leap philosophy, especially when trying to drive societal change. If you mess up a serious shift, people are going to be convinced what existed before was better!
And thanks for the recommendation, I'll add it to my list!
You bet, Joe. And I feel like we see eye to eye with that: we don't know everything, what we are trying to understand is immensely complicated, but we can make some aspects simpler for our readers. That's what it's all about!
I'm going to respectfully push back here. Labor should be pushing first for the highest fixed contributions possible, and industry-leading matches second.
We talked about it before, but unions went "all in" on using pension funds as investment vehicles. They are completely beholden to these plans, and will cast off just about any article in a CBA (including scope) to keep them. Companies know this and continuously weaponize DB plans, holding them over workers heads like a sword of Damocles.
The idea of a "career" has changed over the last 20 years. We can talk about why that is separately, but the reality is, no one's staying in one spot for 20,30,40 years anymore. Even if they want to stay at the same company, they might want to move around between divisions. A DB plan handcuffs them. With a 401k, all that leverage goes back to the workers.
And for those that decide to move on to a new job? The money should go with them. That doesn;t happen with a pension.
For those that kickoff early (God forbid)? There shouldn't be a penalty for having your spouse/partner assume the plan's benefits, but that's exactly what happens.
Labor activists talk a lot about "worker empowerment" while advocating plans that have an opposite effect. We need to change that.
Source: Almost 30 years in aviation, with 2(!) frozen pensions and a 401k.
I agree that unions have not handled pension negotiations well in the past (that's one of many things they've done wrong!), but I disagree on the idea we should steer towards defined contribution plans. Under the current career track of employees moving between workplaces, they may have a theoretical benefit of "going with the worker," but I fail to see how that empowers the worker if it's still not enough to live on at their retirement.
The "old school" pension might not exactly fit the mobile workforce of 2023, but I think the solution there is to tinker with the structure of pensions, not the inadequate DCPs. Perhaps there could be a structure in which workers could collect partial DBP payments from workplaces as they move between them. So it wouldn't be one company paying the whole thing, but each they've worked for over the course of their lives.
Anyway, I appreciate your thoughts!
Great comment Kevin, I can see this happening with the auto workers rn in Detroit. The days of working at one company for the 40 or so years after post-secondary education, and then retiring with a paid-off house and gold Rolex, were over long before us Gen X started working.
Your suggestion of having higher contribution limits is spot on! And they need to make the "catch-up" contribution limits for retirement accounts higher as well.