How Federal Government Policy Helped Create Retirement Insecurity

Financial security in retirement is crucial. Without it, people fall into poverty, work until they die, and die younger than they should. In the 21st century, Americans fund their retirement from Social Security, traditional pension plans, defined contributions plans and private retirement savings plans. Of these four, only Social Security is exclusively the creature of government.

Nevertheless, federal law regulates the other three to such an extent that it is fair to say that all four reflect government retirement policy. Since 1974, the federal government has spent billions of dollars supporting the private retirement system. In turn, the private retirement system has often failed its participants, sometimes leaving them impoverished. In contrast, Social Security has consistent success in reducing poverty and providing a financially strong old age.

The last 50 years demonstrate that the private sector is an unreliable provider of retirement benefits. Private employers deny their workers retirement benefits, siphon off pension monies for corporate use and declare bankruptcy as a means of leaving their losses to the federal government to make right. In turn, the federal government must spend even more money regulating the private sector and protecting private workers and their retirement monies. Whatever the theories, we have decades of proof that if the federal government wants to ensure financial security for the elderly, then it should stop providing tax benefits and direct payments to private sector retirement plans and instead focus on expanding and strengthening Social Security.