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Wednesday, 28 October 2015 06:27

New Report Reveals the Staggering Economic Chasm in Retirement

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MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT

aaaaaaaaaaaaaceoretire345Economic injustice benefits the few at the expense of the many in retirement years. (Image: Institute for Policy Studies)

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A just-released study on the enormous gap between retirement assets and benefits for the wealthy as compared to the rest of Americans - "A Tale of Two Retirements" - blames the divide on "a shift in the rules to favor corporate executives over other working people."

Key findings of the report, which was authored by Sarah Anderson and Scott Klinger for the Institute for Policy Studies and the Center for Effective Government, include:

  • The company-sponsored retirement assets of just 100 CEOs add up to as much as the entire retirement account savings of 41% of American families (50 million families in total).

  • The 100 largest CEO retirement accounts are worth an average of more than $49.3 million—enough to generate a $277,686 monthly retirement check for each executive for the rest of their lives.

  • David Novak of YUM Brands had the largest retirement nest egg in the Fortune 500 in 2014, with $234 million, while hundreds of thousands of his Taco Bell, Pizza Hut, and KFC employees have no company retirement assets whatsoever. Novak transitioned from CEO to Executive Chairman in 2015.

Meanwhile, as BuzzFlash pointed out in an October 15 commentary, US "seniors face year of increased hardship as Social Security benefits stagnate." We pointed out that the government is denying seniors on Social Security a cost-of-living increase next year, even though their costs for food, medical care and rent are increasing.

"Instead of flatlining Social Security, we need to strengthen it," Sarah Anderson told BuzzFlash at Truthout. Moreover, she added:

Of workers aged 50-64, nearly 30 percent have no pension or retirement savings and will be wholly dependent on Social Security, which currently pays an average benefit of about only about $1,200 per month. Meanwhile costs for seniors are skyrocketing. The typical cost for a private room in a nursing home is around $7,000 per month. Unless we take bold action now to narrow the retirement gap, we're looking at a sharply segregated world for seniors, with unmet basic needs for millions and platinum-plated pensions for the privileged few.

news release from the Institute for Policy Studies about the report ominously notes that,

The percentage of private sector workers covered by a defined benefit pension, which guarantees monthly payments, has dropped from 35 percent in the early 1990s to 18 percent last year. Nearly half of all working age Americans have no access to any retirement plan at work. 

Racial disparity creates an even grimmer financial outlook, according to the study:

Among ordinary Americans, 62 percent of working age African-Americans and 69 percent of Latinos have no retirement savings, compared to just 37 percent of white workers.

The report also takes note that even within the elitist ranks of lavish CEO compensation, there is a bias that favors white males:

The rules of the executive retirement system have been rigged to privilege those who have traditionally led large U.S. corporations—white males. Even when women and people of color break into Fortune 500 corner offices, their retirement assets still don’t measure up to those of their white male counterparts.

There are many reasons for the egregiously disproportionate gilded financial retirement assets of top CEOs, but one of them is a perverse incentive that enhances upper management savings and pensions. To put it bluntly, cutting worker retirement benefits, in general, increases CEO retirement funds. According to the report:

The rules now in place create powerful incentives to slash worker retirement benefits as a way of boosting corporate profits and stock prices. And since more than half of executive compensation is tied to the company’s stock price, every dollar not spent on employee retirement security is money in the CEO’s pocket.

A vital conclusion of the report is that the severe economic imbalance in retirement assets and benefits is not a phenomenon that naturally occurs. The injustice is created by government rules and legislation that enable so few to spend their senior years in luxury and financial affluence. Meanwhile, the same system that bestows extravagant retirement wealth on the corporate titans condemns the majority of Americans to a struggle for survival as they age.

Not to be reposted without the permission of Truthout.