401Ks are a disaster: Column

[tblue37]

157. When my sister’s 3 kids were very young, from infancy to elementary

school age, her husband didn’t want to understand how expensive it was to provide for them—food, clothing, supplies, medical expenses, etc. She often had to ask me for financial assistance to provide absolutely essential things. For example, he refused to believe how often a child’s shoes and clothing must be replaced simply because of growth spurts. Although I was in rather dire financial straits myself at the time, I would rely on credit so that I could use my actual cash to help her out. I ended up in significant debt because I was providing for my own 2 little ones as well as his 3 at the time that I was earning very little as a divorced mother of 2.

American taxpayers are like my sister's husband. They don’t want to know how much it costs to pay the salaries of the workers who provide the services they demand. So the salaries and wages are kept artificially low on the surface by deferring part of the employees’ pay for decades. Then, politicians use that deferred money, which belongs to the employees, not the taxpayers, since it is part of the employees’ pay, as a slush fund to pay for other governmental costs, so they can tell the taxpayers that they are keeping their taxes low, so they should keep electing them.

Then, when the employees, who have not yet received that part of the pay they were contracted to get, are ready to retire, which is when they are supposed to get the pay that they agreed to wait for, the politicians and taxpayers are appalled at the very idea that those greedy workers expect to be paid such enormous sums!

Of course, if the taxpayers were willing to pay for the services they demand, then the workers’ salaries and wages would be higher, so they could put away some money for themselves in savings, because they would have something left over after paying for their own living costs. But since deferred compensation allows their employers to keep the workers’ compensation artificially low in real time, most of these workers run pretty close to the wire financially, so they usually don’t have enough money to accumulate much in savings over their working lives.

Also, of course, expenses pop up unexpectedly, and so do temptations, but because the money that is deferred into their pension funds is not accessible until they retire, that is a way to enforce savings over the long-term—if only the employers (the government) would actually pay the money they have contracted to pay rather than taking it for other services the taxpayers want but are not willing to pay for, because the politicians want to avoid risking their cushy sinecures by asking the taxpayers either to actually pay for the services they demand or else reduce their demands to the level they are willing to pay for.