401 Pork Belly Crude Efficient Market Theories

retirementI’ve often talked about the “three-legged stool” on this blog. No, you don’t have to leave. This post won’t qualify for a certain tag that shall remain nameless. I’m going to keep this post on a higher, more sophisticated plane.

So often, in fact, that I should probably elevate the topic to the level of a category so you can ignore all the posts equally at the same time. But that would be convenient therefore I won’t do it.

The future is something which “occupies” my thoughts from time to time. (Yes, my brain has little protesters in it.)

To refresh your memory, the “three-legged stool” is a metaphor rolled out around the time that piece of sassafras Ida May Fuller clutched her first Social Security benefits check in her kung fu death grip. I remember it well because I was there. On the floor. Licking her ankles. Whispering hotly, “Be my sugar momma? Mommy? M to the O to the M M Y.”

The idea was this: To provide for future generations, the retirement funding would consist of three primary components:

  • Social Security – Described as the “foundation” of retirement planning.
  • Pensions – Describe as “company and personal.” The latter confuses me. I don’t know many people with their own personal pensions. And, if so, wouldn’t those fall in the next category?
  • Savings and Investment – This is the personal responsibility bit.

“The metaphor was intended to convey the idea that all three approaches were needed to provide stable income security in retirement,” says the Social Security Administration.

There’s something odd about savings. What was it? Oh yeah. Now I remember. In order to save money one has to have enough income. But every force in this country opposes even a disgraceful pittance like minimum wage. Like Michele Bachmann famously said, “Literally, if we took away the minimum wage – if conceivably it was gone – we could potentially virtually wipe out unemployment completely because we would be able to offer jobs at whatever level.”

One fact is certain: Americans don’t save well for their own retirement. The average American savings has the adjusted buying power, in retirement dollars, to be about enough to buy half a loaf of bread. This leg of the stool is pretty weak.

Meanwhile, we’ve all heard the dire predictions about Social Security and the constant efforts to gut, weaken, cripple, reduce or kill the program. How about raising the retirement age? My projections show that by the time most of us retire, the benefits age will be death plus ten years.

What else you got? The world famous retirement plan. But that sucker is practically extinct. What happened?

Over the last few decades employers figured out they could eliminate pensions and induce employees to sign up for slitting their own throats. For this they used the 401k program, a mechanism never intended to serve as a retirement tool. (Or part of the stool.) The program was designed primarily as a tax shelter for “high earners.” Not your average schmo.

The stratagem is breathtaking if you actually stop to think about it. Company pensions replaced by a system where workers put their own money in the stock market. What could possibly go wrong?

Why would anyone ever think this was a good idea? It turns out that the switcheroo shifted “risk” from employers and their traditional pension plans. With a 401k system employers are “shielded” from risk which is then shouldered by the employee.

We’ve all been trained on the word “risk” like it’s a side dish served at McDonalds. “How much risk would you like with your 401k?” the human resources types would ask.

It turns out that that “risk” associated with 401k plans is more easily weathered by the wealthy “high earners” than the average smuck employee. That’s not too surprising, though, since that’s what the thing was designed to do. Regular people don’t need tax shelters.

What happened due to this nefarious switcharoo is the classic tale of the many being sacrificed for the benefits of a few. The rich get richer. The poor get poorer. And yet another little stepping stone to greater wealth inequality in this great land of opportunity.

The effects of doing away with traditional pensions and shifting the retirement money for average Americans into 401k plans has been deemed a “disaster.” On the plus side, though, companies have been shielded from risk. I’m sure that will offer great ideological comfort when the masses begin to die in the streets and suck on the public teat for everything they’re worth.

Q. What do you call a three-legged stool with no legs? A. Sit and Spin!

Personally I couldn’t be happier. My only goal in life has been to serve as a floatation device for the rich just in case the boat sinks. In the meantime, I’ll be down in steerage with the rats while they dine on the poop deck* on caviar and foie gras. I stand at the ready to serve if the ship hits an iceberg. Call upon me when needed.

Oops. I stand corrected. Poop tag achievement. Sorry.

Bringeth forth thy pith and vinegar

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