Union leaders: Larry Fink is right about the retirement crisis Americans are facing–but he can’t tell the truth about the failure of the ‘401(k) revolution’

Unsurprisingly for a highly successful Wall Street CEO, Fink thinks that the financialization of America’s private sector defined benefit system since the 1970s and its replacement by underfunded savings accounts is a good thing. And so, he stands amid the destruction that flowed from that policy-driven disaster and wonders why Americans are facing retirement with no ability to support themselves. His solution? Don’t retire! However, the real solution is to adequately fund and structure our retirement security system the way other developed countries do.

More specifically, Fink makes two huge factual mistakes and creates one giant confusion in his letter. 

Fink says that America’s retirement security system is in crisis because life expectancy is rising. Of course, that is true among people like him–affluent people working desk jobs. But for the American people as a whole, life expectancy has been falling for years, despite a small rebound post-COVID-19. And for the working poor, it has been falling for almost two decades. The fact that life expectancy is rising for better-off Americans cannot be an excuse for reneging on promises we have made as a society to working Americans that we will all be able to retire with dignity. 

Fink says that Social Security is in crisis because life expectancy is rising. That isn’t true either: Not only is life expectancy not rising for most Americans, but the reforms to Social Security put in place in 1983 would have fully funded Social Security–if there hadn’t been exploding income inequality so that working people’s income stopped growing with the economy and instead income growth went to the top 1%, who don’t pay social security taxes on most of their income.

Even so, the shortfall facing Social Security in the mid-2030s can be easily addressed with enough political will. For example, by making the income of millionaires and billionaires subject to Social Security tax–a simple change that could address as much as 90% of the shortfall.

Finally, and perhaps most tellingly, Fink can’t get his story straight about the destruction of pensions and their replacement by fancy savings accounts with barely any money in them. From sentence to sentence, you can’t tell if he thinks that was a good thing or a bad thing. And he cherry-picks the data. Nowhere in his letter do you learn the ugly fact that despite decades of promotion and happy talk, the median 401(k) of Americans at retirement age has a balance of $71,000–which can’t support an income of more than a few hundred dollars a month. Nor do you get any inkling that most retirement security experts now judge the “401(k) revolution” as a dismal failure that has left older Americans walking the floor at Walmart.

This sort of self-interested confusion has consequences. Right now, some Republicans in the House have plans to attack Social Security, reduce benefits, and raise the retirement age. These plans threaten not just the well-being of older Americans, they are a knife aimed at the heart of Americans’ trust in their government and each other. By avoiding telling the truth about Social Security, Fink effectively is taking the side of those who would destroy the foundations of American society rather than pay a bit more in taxes.

One of us represents 1.7 million educators, healthcare professionals, and public employees. The other has been doing retirement policy work for the American labor movement for 30 years. What we know is that we need smart, experienced, powerful people like Larry Fink to stop trying to confuse working people on the realities of financing retirement.

Here are the realities we need to deal with: Old-style pensions pool workers’ savings provide protections against outliving your money and against capital market fluctuations, and they are run by professionals who can negotiate in a sophisticated way with Wall Street types like Fink. But in the old days, too many of these pensions (but not all of them–see union pensions in entertainment and construction!) weren’t portable, and too many of them were too closely tied to the financial fate of individual employers.

What we need is leadership across our society–from Wall Street, operating companies, politicians of both parties, academics, and other experts–to do three things: fund the gap in Social Security from the people who got rich and didn’t pay into the system over the last four decades; create a portable, funded retirement security system with the insurance features of the old system; and finally, recognize that for every person who is happily at their office in their late 80s, 40 of us are no longer capable of working or are dead.

Retirement for the working people who do the hard work of our country does not need rethinking. It needs to be honored and funded.   

Randi Weingarten is the president of the American Federation of Teachers. Damon Silvers is a lawyer and a former AFL-CIO policy director.

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