"I don't know if it's ever going to be realistic that everyone saves enough to spend the last third of their life on vacation."
That quote is from Allison Schrager, and it's my favorite line in my newest column for the magazine. The column is on the equity premium, why it might not be realistic to expect such high returns from the stock market in the future--and what that implies for our retirement savings if this turns out to be the case.
That's what I thought of when I read this, from Jon Cohn:
But ask yourself the same question you should have been asking then: To what extent is the problem that the retirement benefits for unionized public sector workers have become too generous? And to what extent is the problem that retirement benefits for everybody else have become too stingy?
I would suggest it's more the latter than the former. The promise of stable retirement--one not overly dependent on the ups and downs of the stock market--used to be part of the social contract. If you got an education and worked a steady job, then you got to live out the rest of your life comfortably. You might not be rich, but you wouldn't be poor, either.
Unions, whatever their flaws, have delivered on that for their members. (In theory, retirement was supposed to rest on a "three-legged stool" of Social Security, pensions, and private benefits.) But unions have not been able to secure similar benefits for everybody else. That's why the gap exists, although perhaps not for long.
The fact is that local and state goverments have promised a lot more than they can deliver financially, in part because people love public services but hate to pay the taxes for them. In the short term, then, budget cuts are probably inevitable. And, in this political universe, the likely alternative to reducing public employee compensation is cutting essential services for people who are just as worthy and quite likely more needy.
In the long term, though, it seems like we should be looking for ways make sure that all workers have a decent living and a stable retirement, rather than taking away the security that some, albeit too few, have already. But that's a conversation about shared vulnerability and shared prosperity--a conversation we don't seem to be having right now.
It was nice that a combination of rising life expectancy and broader pension coverage allowed a large segment of American workers to take what amounted to a multi-decade vacation. (Though this was never quite as widespread as people now "remember"). But this was never going to be sustainable. Retirement experts typically say that retirees should shoot for 75-90% of their working income in retirement (the theory being that some expenses fall, but other expenses rise, and you don't need to save for retirement when you're already retired).