Young people more likely to retire in poverty, according to study

Approximately half of California workers will retire in or near poverty, according to a study published Monday by the UC Berkeley Center for Labor Research and Education.

The study details the fiscal consequences of the decline in secure retirement plans offered by California employers. In the past, many employers offered defined benefit pension plans, which guarantee monthly payments based on salary before retirement and length of time employed. Now, most California employers either offer 401K accounts, which force employees to invest for themselves, or do not offer any sort of retirement plan.

Nari Rhee, associate academic specialist at the labor center and editor of the study, said that money in 401Ks is at risk if the market does not do well or if a person invests poorly.

“We’re not all Warren Buffett,” she said. “We don’t all have the skills to game the system. If the market doesn’t do well, or if you make a bad decision about how to invest, there’s no security in terms of having any money for retirement.”

Workers can also invest in private individual retirement accounts, but Rhee warned against these types of accounts because they often charge exorbitant hidden fees and still involve a certain amount of risk.

Since only 40 percent of workers currently have retirement plans, one-third of workers between the ages of 45 and 64 will be in poverty after retiring,  according to Rhee. However, she said that 55 percent of workers aged 25 to 44 will not have enough money to survive after they retire since they will be relying mostly on social security to make up for unpredictable 401Ks.

“It’s especially scary for young people,” Rhee said. “People should start saving basically as soon as they start working. Employers should be helping workers save, and right now most employers aren’t.”

State Senator Kevin de Leon, D-Los Angeles, is working on a bill that takes its cues from Rhee’s research, according to his chief of staff, Dan Reeves.

The bill suggests that all workers not offered a retirement plan from their employers pay into government-sponsored individual retirement accounts. Rhee said she hopes that the bill will be amended to include more protections for the workers’ investments.

Nancy Hwa, communications director for the Pension Rights Center, said that her organization was not surprised by the study’s findings since the country was in a retirement crisis even before the recession.

“The federal legislature is trying to make 401Ks more like traditional retirement plans, but we don’t think that’ll fix things in the long run,” Hwa said.

Rhee singled out women, labor unions, young workers and consumers as the groups most affected by the lack of retirement options.

“I’m optimistic because there’s a lot of room for the state to do something that can really, really help workers, but I think it’s going to take workers asking for it,” she said.

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  • Claude

    the title throws me off: it could be interpreted Squelchy, as if retiring at 25 found to be a bad decision for the later years of life.

    but then again, what is up with this pattern: work now so you can retire in a pile of money and spend it slow?  that’s such a bomb-shelter mentality /slash/ survival of the fittest: compete for scarce resources to gather while you’re young and fit so you can make it later on.  booooo individualism, let’s work together better

  • Fake

    If you want to see the future of California, just look at Mexico.

    If you want to see the future of Detroit, just look at Africa.

    The more the truth hurts, the more you need to hear it.

    Mexico and Africa are both very rich in natural resources.

    Mexico and Africa are only failures because of the people and their culture.

    • robelroy

      If you want to see almost 100m people slaughtered or starved to death in WWI, WWII and western ideologies like communism and fascism.. Look to Europe.

      If you want to see 40m people killed in the US and Mexico due to Colonialism… Look to Europe.

      If you want to see over 20M people killed or strarved in colonial wars in Africa… look to Europe.

      If you want to see over 50M people killed or starved in South and East Asian colonial wars… Look to Europe.

      If you want to troll around right wing hate-group websites, worry incessantly about how ones own genital size compares to other groups, and ignore the shortcomings present equally in every race of man… Look to “Fake”

      • Stan De San Diego

        It wasn’t some form of higher ideology or moral purity that keeps third-world people from killing each other, merely a lack of technology. Anyone who has paid attention to Africa and the Middle East is damn well aware that those people wouldn’t hesitate to use WMD’s on their fellow man if they had access to them.

        • robelroy

          That’s really interesting! I provide a list of things that actually happened and you provide a fantastical, hypothetical situation that has never happened. Tell me Stan, what would happen if they had unicorns? Or piles of kryptonite? Or better yet, if they had back the tens of millions of people who were murdered by Belgians, Dutch, British, French etc, etc, etc, etc.

          Come now, my man. I am well aware of the brutality that happens in that part of the world, but lets not kid ourselves- the oh-so-tech savvy and diligent Chinese killed 40M of their own people in the Cultural Revolution, after the Japanese murdered 10M. This says nothing of the spasms of blood in Europe in that same time frame that put out the same number of deaths. “But if they had the technology”! But if my aunt had balls she would be my uncle!

          • Stan De San Diego

            What are you smoking again? Go look at Darfur, Rwanda, Somalia, India, and all over the Middle East. Killing people isn’t unique to the western nations.

          • robelroy

            Oh, I know. But let’s not run around ignoring history books and statistics. ALL humans do bad things, and seem to do it in pretty equal proportions.

    • Africa is a pretty big place. It’s so big, actually, that it has it’s own continent. That makes it pretty difficult to claim that “Africa is a failure.” The rest of your claim is so historically ignorant and racist that I’m not even going to bother.

  • Stan De San Diego

    Uh, this article and all the other responses are at least 2 months old. What freaking algorithm is the Daily Cal using that would cause this to be listed as “most popular”?

    • Anonymous

      posted on Reddit this morning.

  • Guest

    “pay into government-sponsored individual retirement accounts”
    And how will this differ from Social Security?  Will Uncle Sam maintain separate accounts for all citizens and guarantee them against loss?  If not, what’s the point?

  • Guest

    “money in 401Ks is at risk if the market does not do well”
    And money in defined-benefit plans is not?  Try applying a little logic.

  • One of the reasons we are seeing an increase in poverty is because we are IMPORTING more of it while driving off wealth at the same time. As the so-called “progressives” in California spend more and more taxpayer money on welfare state social programs, more and more of the people who pay an ever-increasing tax burden get fed up and move out of  state. In addition, this country’s refusal to enforce our immigration laws means more unskilled, uneducated, impoverished people coming. With less and less working productive taxpayers to foot the bill for more and more people living off of government largesse, why is anyone surprised we are driving ourselves into financial ruin?

  • Guest

    This sounds like a headline from the third world…….Amazing that California has so many people from Mexico. Who would have thought that moving third worlders from one area to another would do anything to change their behavior.

    We have imported poverty. Welcome to the future of the United States, or as we will soon be calling it, “Los Estatos Unitos”.