Our retirement system is a disaster for working people. We can fix it

As chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, I recently held a hearing on the retirement crisis in America.  

At that hearing, I had the opportunity to hear from Sara Schambers, a fourth-generation autoworker from Livonia, Michigan.  

What she told the committee was extremely revealing.  

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Sara’s grandfather was an autoworker at Ford Motor Company for three decades. In return for his work, he was able to retire at age 55 with a pension and good healthcare.

Working-class seniors used to be able to look forward to retirement. Now, that future is bleak for many. (iStock)

Sara’s grandmother was diagnosed with Lou Gehrig’s disease. She had to retire early because of the illness. But she didn’t have to choose between paying her medical bills and buying dinner for her family, because her job provided her with the retirement security she needed.  

But retirement looks very different for American workers today. 

Although Sara has been an autoworker for 17 years, unlike her grandparents, she will not have healthcare when she retires. She will not have a pension.  

As she put it: "We have people leaving American companies after 30 years of service with nothing more than a ‘Have a nice day,’ and ‘I hope the stock market doesn’t crash.’" 

Sara is not alone.   

In America today, almost 45% of older Americans between the ages of 55 and 64 have no savings at all and no idea how they will be able to retire with any shred of dignity or respect.   

And as frightening as the retirement crisis is for older workers, it is an even bigger concern for the millions of senior citizens who are no longer able to work, who have exhausted all of their savings and who have no pensions. 

Incredibly and unacceptably, one out of every four senior citizens in America are trying to live on an income of less than $15,000 a year, while over half of our nation’s seniors are trying to survive on an income of less than $30,000 a year. 

Think about that. How do you pay the rent, pay for health care and prescription drugs, and put food on the table on just $15,000 or $30,000 a year?  The answer is that many cannot.  That should not be happening in the United States of America. 

According to the Organization for Economic Co-operation and Development (OECD), we now have the dubious distinction of not only having one of the highest rates of childhood poverty in the industrialized world, we also have one of the highest rates of senior poverty compared to other wealthy nations. 

In Denmark, only 3% of seniors live in poverty.  In France, the senior poverty rate is 4.4%.  In Germany, it’s 9.1%.  In Canada, it’s 12.3%. In the United Kingdom, it’s 15.5%. But in America, over 23% of senior citizens are living in poverty. 

In my view, that is unacceptable. It has got to change.  

In America today, almost 45% of older Americans between the ages of 55 and 64 have no savings at all and no idea how they will be able to retire with any shred of dignity or respect.   

Fifty years ago, it was not uncommon for corporations to provide workers with a defined benefit pension plan that guaranteed a monthly income in retirement.   

Back then many corporations made a promise to their workers: If they worked at the same company for a period of time they would be rewarded with a monthly check that would enable them to live comfortably in retirement.  

The longer you worked at the same company, the bigger your retirement check would be.  And the employer would bear all the responsibility to fund the pensions of their workforce. 

Sadly, those days are mostly behind us.  As a result of a relentless 40-year war on the working class waged by corporate America, traditional pension plans have become an endangered species on their way to extinction.  

And the results for workers have been tragic.   

In 1983, 31% of Americans were at risk of not being able to maintain their standard of living in old age.  In 2022, that number rose to 39%.  In other words, we are moving in exactly the wrong direction in terms of economic security. 

What can we do to address this crisis which is impacting millions of older Americans? 

First, at a time when far too many seniors are living in poverty and many older workers have nothing in the bank for retirement, we must oppose the efforts of the vast majority of Republican members of Congress who want to cut Social Security. 

Retiree healthcare used to be covered as part of their pension. Now, retirees often struggle. (iStock)

In my view, we must do the exact opposite.  

Congress must expand Social Security so that every senior citizen in America can retire with the dignity and the respect that they deserve.   

And we must also make Social Security solvent for generations to come. 

Legislation that I have introduced, the Social Security Expansion Act, with nine of my colleagues in the Senate, accomplishes both of those goals. 

According to the Social Security Administration, this bill would make Social Security solvent for the next 75 years, lift millions of seniors out of poverty and expand benefits for seniors and people with disabilities by $2,400 a year.

How is that possible? At a time of massive income and wealth inequality, when billionaires pay an effective tax rate lower than the average worker, this legislation demands that the wealthiest people start paying their fair share of taxes. 

Today, absurdly and unfairly, a billionaire pays the same amount of money into Social Security as someone who makes $168,700 a year as a result of the cap on the Social Security payroll tax.  

That means, if you make up to $168,700 a year, you pay 6.2% of your income in Social Security taxes. But if you make 10 times more — $1,687,000 — you pay just 0.62% of your income in Social Security taxes.  

Fifty years ago, it was not uncommon for corporations to provide workers with a defined benefit pension plan that guaranteed a monthly income in retirement.   

That may make sense to someone. It doesn’t make sense to me. 

Our legislation applies the Social Security payroll tax  to all income – including capital gains and dividends – for those who make over $250,000 a year.  Under this bill, 93% of households would not see their taxes go up by one penny.  

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But let’s be clear.  Expanding Social Security is only part of the solution. We must also restore and expand traditional pension plans. 

We can no longer tolerate a rigged retirement system that allows the former CEO of Starbucks to receive a $60 million golden parachute after five years of work, while millions of workers are denied a pension after a lifetime of work.  

In my view, every corporation in America should be required to provide a retirement plan for their workers.  And if corporations choose not to offer a retirement plan, they must give workers the option of contributing to a federal pension plan similar to what members of Congress and federal employees receive.   

Today, federal employees and members of Congress have a certain percentage of their salaries deducted from their paychecks and put into the Federal Employees Retirement System (FERS) that provides a pension based on salary and years of service.   

If corporations don’t provide pension plans, their workers should be allowed to receive the same type of pension that members of Congress receive. 

If Congress can provide trillions of dollars in tax breaks to billionaires and large corporations, if Congress can bail out the crooks on Wall Street who caused millions of Americans to lose their jobs, homes, and life savings back in 2008, please do not tell me that Congress can’t support a secure retirement for working Americans. 

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Bernie Sanders is an independent who represents Vermont in the U.S. Senate.