I have understood that the United State’s economy is stacked against the poor, and has been for decades. Since the early 1980’s it is becoming so for the middle class as well. We have transferred wealth by the trillions out hands of the majority of Americans and therefore out of the circulating economy to the plutocracy. I don’t think these facts will be challenged or will surprise anyone here. Knowing this is one thing, seeing and living it is another. I’ve spent the last couple of weeks with my wife helping her parents work through the financial issues of their retirement. Diving into the weeds of their life in retirement has been sobering to say the least.
I want to preface this story with a caveat. My in-laws are neither at risk of being homeless nor not being able to eat. In many ways they are and will remain more comfortable than most retirees in the US today. So please don’t flame me that I shouldn’t whine about “white-people problems.” I just can’t escape how their story is emblematic of how our plutocratically controlled financial system treats even those who seem to have plenty.
My father-in-law is a professional. He is a industrial engineer who has worked for the same large corporation for most of his work life. He rose in ranks to be a senior engineer of a large manufacturing plant. He was successful, and was often asked to spend time at other facilities across the country to help them implement a variety of plant upgrades in which he specialized. My mother-in-law was a public school teacher, giving more than 30 years of her life teaching. They considered themselves solidly in the middle class, I might even put them in the upper middle class. My in-laws raised and educated 2 children, sending both to college, leaving both with minimal student debt. You would think that this couple would be fairly well set up for retirement.
The first 7 years seemed comfortable for them, but my father-in-law did continue to work doing some consulting; I thought just to get out of the house and stay busy. However a couple of years ago he developed medical issues that have prevented him from working any more. Then a month or so ago he called my wife and said they needed some help sorting out their retirement accounts. This was the first sign of trouble. My wife spent the next week or so pouring over their retirement assets and other financial matters. We sat down and reviewed all of this and my take away is that my in-law’s comfortable retirement had been beset by leeches, pulling valuable assets and income away from their intended purpose to support them.
Here is a brief summary of what I found:
- My father-in-laws defined benefit plan was converted to a defined contribution plan many years ago. The company encouraged those who would qualify for the defined benefit by their tenure with the company to accept a cash buyout to get them into a defined contribution plan, which my father-in-law took. This left him with a block of money to manage himself instead of guaranteed income stream, and in the process saved his corporate employer money.
- They purchased, about a decade ago, a complex variable annuity from a family “friend” who was a financial planner. This financial planner pushed them hard to put essentially all of their liquid assets into this annuity. They even pulled some equity out of their house when they sold it that ended up in the annuity. Their understanding of what this annuity would do for them bears no resemblance to reality. Now with the annuity maturing they are bound to unattractive options. The cash payout option gives them surprisingly little more than the principal they put in 10 years ago. The more attractive roll over options built into this product binds them to a permanent annuity by the same company, producing less income than they were led to believe at the time of purchase. They were befuddled, as they thought after holding the money for a decade the annuity was guaranteed to be a large cash nest egg now for re-investment, but the complex variable nature of this instrument yielded a great result for the company and lackluster performance for my in-laws. I attempted to review the prospectus of this annuity, but it was > 100 pages of dense legalese.
- In their monthly budget about $1200 goes to drug copays. This is in addition to what Medicare Part D is paying! This is the largest item in their monthly budget, going to the medical industrial complex.
The voracious appetite of the modern American economy to extract from average Americans into corporate coffers is on full display, even for the previously comfortable middle class. We see corporations offloading retirement obligations onto workers, a financial services industry who fight rules making them fiduciaries to their clients so they can sell high profit complex products that workers can’t possibly understand and are not in their best interests. All of this transfers wealth from the worker to corporations and their owners. And to top if all off we have a medical system mining our elderly as well. Because of our laws prohibiting Medicare from negotiating drug prices and our patchwork healthcare delivery system we pay about twice what we should for drugs and some of that price gets extracted from patients (the rest from tax payers).
I see my in-laws as our economic dysfunction writ small. Normal folks, playing by the rules, and subsidizing the billionaire class with their retirement.