If Americans appear to be not fully sold on the idea of saving for their retirement, the explanation might lie in two very broad and different possibilities:
1. They feel they can’t maintain a modern lifestyle and afford to save.
2. Deep down, they feel that some outside force will take care of the matter and provide the wherewithal when the time comes.
Whichever the reason, fewer workers than a year ago are saving for retirement, according to a report by two research organizations. Moreover, they say, confidence in a future comfortable retirement is down.
Supporting the first possibility is the concern that whatever small amount workers save could be wiped out by illness or other forces beyond their control, such as rising prescription and utility bills.
It is a fatalistic attitude, but understandable when you consider the overwhelming anxiety that grips some families when they match their incomes against the demands, such as for tuitions and mortgage payments.
And perhaps taxes, too. Americans in recent years have been paying more in taxes than for food, clothing and shelter, the traditional essentials. The alternative is to stop saving rather than lower living standards.
Worse, they sense that taxes might very well take an ever bigger bite in future years despite loudly sought tax cuts.
The possibility of taxes taking an even larger budget share is raised by the Tax Foundation, whose documented but controversial Tax Freedom Day, has been pushed back to May 3 this year. It was April 18 in 1992.
It means,the Foundation says, that taxpayers must work until then simply to meet federal, state and local tax bills. And, it adds, another week will be added to the grind by 2011, the result of the tax code’s built-in tendency to absorb a larger fraction of the nation’s income.
While those angry at the tendency have a tendency of their own to blame an avaricious government, much of the tax growth has, in effect, been sought or acquiesced to by voters approving more government services.
That brings up the second possibility – that some people harbor the notion that government will bail them out. How, they ask, can it not do so? And, if not the government, then possibly the stock market.
More than one survey has shown, for example, that American investors believe a stock market that can scalp their portfolios one year can replenish it the next.
The idea of easy fortunes has not been eliminated.
The decline in savings for retirement comes at a time when publicity about the need to do the very opposite - that is, raise savings rates – is so loud that few worker-taxpayers have failed to hear it.
But savings declines are what’s been found by the independent researchers – the Employee Benefit Research Institute and the American Savings Education Council – and it presents serious issues of public policy.
Obviously, there’s evidence of a fundamental contradiction: that you can have the benefits, but avoid the risk and the pain.
Relying on government rather than oneself to pay for retirement means higher taxes and maybe lower living standards now.
Depending on the stock market means assuming the risks and perhaps facing a miserable retirement.
It’s a painful choice for those who face it, but it is a choice – an alternative rather than a dictate.
John Cunniff is a business
analyst for The Associated Press