Rondell Johnson is a 23-year-old baggage handler at the Philadelphia International Airport. He aspires to one day attend business school and prepare for a career as a real estate entrepreneur. But he, like many other low-wage workers who work full time for minimum wages, brings in “just over $15,000 a year before taxes.”
The poverty line for one person who lives alone is $11,490.
The latest Census Bureau data on poverty is a sobering reminder of America’s need to address income inequality. It’s also a wake-up call for lawmakers to create bold policies to strengthen our nation’s retirement system.
Under our current policies, retirement has become one of the greatest examples of income inequality in America. The availability of retirement savings is often tied to income for today’s workers who have fewer savings options than previous generations.
For low-wage workers such as Johnson, obtaining a secure job with decent wages feels difficult, and achieving a secure retirement is virtually impossible.
“I don’t want to retire where I started,” he says. “I started broke. I started in poverty. I’m going to retire into poverty, too? Then what has my life been about at that point?”
A recent report from the Economic Policy Institute shows Rondell’s story is more common today than it was 20 years ago. Our shift from traditional pensions to more individualized savings plans such as the 401(k) has helped spur retirement income inequality in America.
The majority of our most affluent workers have savings sitting in a 401(k) or similar retirement savings account which averaged $308,674 in 2010.
In contrast, only 52 percent of middle-class Americans have savings in retirement accounts where the average balance was only $34,981.
Retirement savings options and balances are severely low for America’s poorest workers who are less likely to have access to a retirement plan at work or cannot afford to contribute enough out of their own stagnant wages. Only 11 percent of workers, representing the lowest quartile, have any 401(k) savings. Their average savings balance is just $7,543.
The rise of the 401(k) has also helped lead to a greater reliance on Social Security. Although Social Security benefits were never intended to be a stand-alone retirement plan, it is the primary source of income for 65.3 percent of retirees.
Perhaps one of the boldest, income gap closing policies lawmakers can implement is strengthening Social Security by making everyone pay their fair share.
If wealthy bankers, CEOs, athletes and celebrities contributed the same percentage of their income to fund Social Security as the 99%, we would also be able to significantly improve benefits for current low-income retirees receiving $1,200 or less a month, deliver retirement security to more workers, and help close the wealth gap.
This article was originally printed on SEIU on September 27, 2013. Reprinted with permission.
Author: KEIANA GREENE-PAGE.