By G. Roni Green, Secretary- Treasurer, SEIU Local 668
This may be hard to believe but 39-year-old Greg Riedlinger of Forty Fort, Pa., has a monster under his bed.
Retirement insecurity is a monster that lurks for millions of young workers coping with America’s slow economic recovery and the breakdown of our retirement system.
Greg is in many ways fortunate – he has a good job that offers a retirement plan but he still faces the real risk of retiring in poverty. The vocational rehabilitation officer finds it hard to save for the future as he juggles more than $100,000 in student loan debt and rising living expenses.
But one of the biggest threats to Greg’s retirement security is Pennsylvania’s reoccurring pension reform proposals that continue to multiply like nighttime monsters as lawmakers take a one-sided approach to balancing the budget, often on the backs of workers like Greg.
Last month, Gov. Tom Corbett announced a pension reform proposal as part of his FY2013-14 budget. The pension proposal intends to divert new hires from the state’s well -respected defined benefit pension plan and instead into a risky defined contribution plan. Additionally, the Corbett Administration wants to change the multiplier for current employees altering their future benefits.
While lawmakers study spreadsheets, workers like Greg already are losing sleep over the impact of possible changes.
“I started (my career) feeling pretty sure I would be able to retire after 30 years and live secure enough to enjoy the life I earned. I'm nine years in and it’s a lot less secure now than it was when I started, and I still have at least 21 years of potential changes to deal with,” says Greg.
Greg isn’t the only one in the under 40-crowd fearing retirement insecurity.
Younger Americans in their late 30s are most likely to doubt their ability to retire with dignity, according to a recent non-partisan Pew Research Center study. This doubt is largely attributable to the breakdown of America's retirement system. Younger workers are less likely to have access to the traditional “3-legged stool” of defined-benefit pensions, personal savings and Social Security that provided retirement security to previous generations.
"Millennials" who have access to a retirement plan at work are also more likely to have only risky 401(k) plans, which force workers to shoulder all of the risks and costs of saving for retirement, rather than defined-benefit plans which pool investment and longevity risk for large groups of workers. Studies have shown that households with 401 (k) accounts, whose balances are often used for reasons other than retirement, have less than one-quarter of what is needed to maintain their standard of living in retirement.
Greg has firsthand knowledge of the risks associated with 401(k)s because his father exhausted his entire retirement savings in one year after becoming ill.
“It scares me for anyone to have to rely solely on these 401(k) plans for retirement income. People are often signing up for plans not fully knowing their impact,” says Greg.
Although pension reform in Pennsylvania is coming, it’s not too late to properly tackle monsters under the beds of workers like Greg. I urge lawmakers to think outside the box during this critical legislative session and acknowledge a slash and cut approach to budget reform is no more beneficial to taxpayers than the tax breaks we give large corporations.
This year alone, Pennsylvania will spend $2.4 billion on business tax breaks. That amount has tripled over the last decade and does not count the hundreds of millions of dollars lost annually to corporate tax loopholes. Most of these tax breaks primarily benefit the largest corporations and come with no commitment to create jobs, according to the Pennsylvania Budget and Policy Center.
Rather than balance the budget on the backs of workers like Greg, lawmakers should look at ways the state can boost its revenues by closing tax loopholes and investing in schools, colleges, hospitals and infrastructure to strengthen our economy.