A new report by the Economic Policy Institute rehashes what many already know about retirement savers. This is no surprise coming from an organization that has opposed self-savings initiatives and has instead supported the entitlement status quo. The EPI’s report shocks and awes with charts and graphs showing the savings disparities between rich and poor, black and white, young and old, etc. None of the data appears to be incorrect, however, many charts border on misleading and the blame for all inequality is placed on 401(k) accounts which is completely and irresponsibly wrong.
Here are some examples. Figure 2 shows that the share of workers age 26–61 participating in an employer-based retirement plan has declined since 2000. Fair enough, but the workers in these data are not differentiated by full-time versus part-time (which the EPI admits that part-time workers are less likely to participate in an employer-based retirement plan), nor does the chart indicate what percentage of workers participate in retirement plans outside of work, such as traditional and Roth IRAs. So it tells us nothing about what percentage of the population is contributing to a retirement plan in general. But good news! Several charts later, Figure 8 shows that the share of workers age 26-61 contributing to all retirement accounts was at 53 percent in 2008 (the same as it was in 2000) and has now declined to 50 percent. However, this decline coincides with the housing crisis and recession of 2008. Are 401(k)s to blame? Don’t think so. How about a weak economy and high unemployment?
Figure 23 mirrors a similar phenomenon among races and ethnicities. Participation in employer-based plans peaked among all races in about 1999 and 2000, declined, then peaked in 2008 before declining again in 2010. What EPI does not mention is that the decline in participation for white participants from 2008 to 2010 was actually greater than for blacks and Hispanics. All have been hit hard by unemployment, but it is generally known that blacks and Hispanics have fared worse under the Obama administration and have experienced higher unemployment rates than during the Bush era.
There are a host of other charts that state the obvious but attempt to blame any disparities on 401(k) accounts. More examples: single people have less in retirement savings than marrieds…this is more attributable to the fact that married couples (of all races) have generally higher incomes and fare economically better than single people. Figures 32 to 43 show that those who have college degrees are more likely to save in retirement accounts and have more in retirement accounts than those who don’t have degrees. Again, this comes as no surprise. In fact, NCPA recently published a report about how a college education boosts retirement income and general well being.
While EPI does not come out and say that employer-based retirement plans are the devil and should be done away with, they fail to point out an obvious piece of this puzzle…the current recession, not saving for retirement, is having a negative impact on workers and retirees. Attempting to ignore today’s economic climate is a bit lame.