Sunday, October 12, 2008

The Great Depression: Your 401(k), Your Vote

At just about the same time that millions of people in the United States are deciding who they want to lead their country for the next four years, many of those people will get a 401(k) account statement in the mail. Many other people know how to check the status of their 401(k) account over the Internet. What they are seeing is not very good.

White House

These 401(k) accounts are the only retirement plan, besides Social Security, for millions of people. They are also the only source of any savings for many workers.

Because of the recent total collapse of the world economy, the investments most people hold in their 401(k) have dropped incredibly. A typical 401(k) statement is going to tell the account holder that they have 50% less retirement money than they had last year.

For the younger people that are not planning to retire for 10 or 20 years these 401(k) accounts will have time to sit and hopefully recover some value over that time. For people that were planning to retire in the next three to five years, there is a crisis to face. Will they be able to afford to retire? What will they do if their employer forces them to retire at age 60? Working until age 65 or 70 was not in their plans but it might be now.

The Washington Post addresses this issue in today's edition.

Another big problem is that so many people are losing their jobs at the same time right now. If they remain out of work for very long these people will need to sell the investments in their 401(k) accounts. They may be forced to sell their investments when those investments are way, way down in value. That locks in the loss of all that retirement savings and then the government slams you with a huge tax bill at the same time.

Orchard Beach State Park 00048

The candidates for president, Obama and McCain, are not really addressing the specific issue of 401(k) accounts right now. There is nothing much that they can do for the little people, the citizens that keep this country running. Our politicians are mostly focused on helping the bankers that already get paid millions each year. It costs too much for the government to send any significant help to Mom & Pop.

Oh, they might borrow some money from China and send us another check for $300 or $600 but that's about it. We are on our own as far as our retirement plans are concerned. That's why most big companies closed their pension plans and got rid of other retirement benefits like health care. The government had a better plan. Now we are stuck with that "better plan" and it is not nearly enough.

It seems unfair that most government workers actually still have a pension plan and other excellent retirement benefits. Many government workers still belong to a union. Remember unions? Unions were organizations that were supposed to protect worker's rights in the face of business owners that only wanted more profits for themselves. Now only a very few people belong to unions, mostly government workers. Members of U.S. Congress have a great pension plan and health care benefits for life. The citizens these Senators and Representatives supposedly work for have limited or no health care plan and destroyed 401(k) plans.

U.S. Capitol 19914

Not too long ago Bush wanted us to put our Social Security money into the stock market. Luckily Congress put a stop to that idea. It is about time we asked the candidates for president and people running for Congress if they have any proposals for reform to the 401(k) account crisis. Those accounts now join the world economic crisis as a major source of problems for nearly everyone.

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