For 30 years, Jacqualyn James taught American history and psychology to high school students in East Stroudsburg, Pennsylvania, in the eastern part of the Keystone State.
A graduate of Bucknell University, she became a teacher to support her family after she and her husband divorced. “I considered it very important for young people to learn about the history of this country,” she told NBC News, estimating that she had already taught 7,000 students when she retired in 1998.
During her years as a teacher, James regularly paid into her pension, the Pennsylvania Public School Employees’ Retirement System. “I expected it to last a lifetime,” said the 88-year-old.
Although her $25,000 annual pension actually lasted, because of a fluke in Pennsylvania law, it is now worth half what it was when she retired. That’s because James and about 70,000 other retired public servants employees in the state have not received a cost-of-living adjustment in their monthly payments for more than 20 years. According to the Bureau of Labor Statisticsevery dollar in pension payments that was promised to James when she retired is worth 51 cents today.
James and his hapless former colleagues retired before the 2001 enactment of statehood law known as Law 9, which increased pension benefits for public employees. Some of these 70,000 people, whose average age exceeds 80, face significant financial difficulties. Many do not have access to Social Security, as is the case of around 40% of all public school teachers across the country, according to the National Association of State Retirement Administrators.
Overall, the U.S. economy is humming along, the data shows, a situation that typically favors an incumbent president in an election year. But financial anxiety among voters in swing states is complicating the 2024 picture. In Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin, the so-called poverty index, an economic measure that combines four years of inflation with the current level of unemployment, it is being higher than in states that reliably vote Democrat or Republican. , a recent analysis by Bloomberg News programs.
Retired public servants like James aren’t the only ones facing difficult retirements in Pennsylvania. About 2 million private sector employees in the state, or 1 in 3 workers, do not have access to retirement plans at their workplace, according to John Scott, director of retirement projects at the Pew Charitable Trusts, an organization nonprofit that researches public policy. problems. In fact, unless Pennsylvanians save more, Pew researchers predict, state taxpayers will need to provide a estimated $14.3 billion over the next decade to support older families with inadequate retirement savings.
“If you look at the data, how little people have saved for retirement is really a function of having access to a retirement plan,” Scott told NBC News. “Two million workers without access explain a lot why there is a feeling of insecurity about their future.”
Even those who have saved money for retirement are worried about their future. Victor Martens, 55, owns a small construction business in Mount Pocono, Pennsylvania, with his son and has regularly contributed to his individual retirement account. “You save enough for retirement, but then you have inflation,” he said. “And prices keep rising.”
An afterthought
For decades, pensions like the one James relies on, or similar ones offered by companies, have been the most common retirement vehicle for workers. Today, self-directed savings plans, such as 401(k) plans and individual retirement accounts, or IRAs, are the norm.
In the midst of this shift, many Americans don’t have any savings for retirement. Last fall, the Federal Reserve Board published a analysis of U.S. household finances and found that just over half — 54.3% — had a retirement account in 2022, up from about 50% in 2019. The average amount in these retirement accounts is $86,900, according to the analysis . For those closer to retirement age, ages 55 to 64, the average amount held in a retirement account in 2022 was $185,000 nationwide.
Having a retirement account does not necessarily mean that a saver has enough money to retire comfortably. An esteemed two fifths of American workers have inadequate savings set aside to maintain the standard of living they enjoyed while working, according to the Center for Retirement Research at Boston College. Although this number has improved since 2019, it worries policymakers.
In Pennsylvania, the proportion of households with people aged 65 and over with annual incomes of less than $75,000 – an indicator of financial vulnerability – is expected to increase 17% between 2020 and 2035, according to to look for from the Pew Trusts.
The problem for many workers in Pennsylvania and elsewhere is that their employers don’t offer 401(k) plans, and without an automatic paycheck deduction, saving for retirement is an afterthought. Small businesses, in particular, find it expensive and complicated to set up retirement plans for their workers, said Pew Trusts’ Scott. “It is possible to save for retirement outside of the workplace, but very few do so – just 13% of Americans,” he said. “There are a lot of steps you need to take.”
Fifteen states have devised a solution to this problem – passing legislation mandating government-run automated savings plans that make it easier for workers to set aside money for retirement. Oregon was the first to create an automated savings plan in 2017 and seven other states now operate such accounts, with another seven coming online soon. Progress has been promising, Scott said — in the six states whose plans have been in effect the longest, 850,000 workers have set aside $1.3 billion for their reforms.
A bill to create such a savings plan for Pennsylvania workers has been proposed in 2023. program, known as Keystone Saves, workers would voluntarily forward payroll deductions to a fund overseen by the state and operated by a third-party finance company. The project has not yet been approved in both legislative houses.
Walt Rowen, third-generation owner of Susquehanna Glass Company in Columbia, Pennsylvania, is excited about Keystone Saves. He employs 40 people making decorative bar and kitchenware at his factory about an hour west of Philadelphia.
“When I first heard about it, I thought it would be absolutely perfect,” he said of Keystone Saves. “A lot of people have worked for us for 25 to 35 years. We know the impact: when they finally retire and don’t have enough money saved, it’s difficult.”
Rowen said he considered creating a 401(k) plan for his employees about 15 years ago, but discovered it would cost between $2,000 and $4,000 per employee to set up and operate. Furthermore, he said, many of his workers told him they would not participate.
Now, he says, offering such plans could help attract workers. “Over the years, I’ve had people say, ‘I’d love to work for you, but now I have a 401(k) plan at my job,’” Rowen said. Keystone Saves would solve that problem, he said.
$1.4 billion for Wall Street
The pending legislation would also solve the problem for the 70,000 retired workers like James who have missed out on cost-of-living increases in their income over the decades.
State Senator Katie Mutha Democrat who represents the 44th District near Philadelphia, is one of several lawmakers sponsoring accounts to give state retirees money, she says the state owes them. “This is a group of people who serve the public in a variety of capacities,” Muth told NBC News. “This is a human rights issue.”
Muth and the other lawmakers supporting the COLA legislation I estimated costs are between US$89 million and US$125 million. A lot of money, sure, but Muth noted that Pennsylvania Rainy day fundThe state’s reserves for a financial crisis contained $6.1 billion last fall.
Furthermore, Muth said, the deprivation of retirees is especially stark when compared to the fees that wealthy investment firms have generated by advising on pensions over the years. “You can’t say the system is working when retirees aren’t seeing these cost-of-living increases, but their pension dollars are being invested with $1.4 billion in investment fees for pension managers. Wall Street,” she said.
James wrote letters and emails to lawmakers about the issue, to no avail. Raising their ire: Pennsylvania lawmakers receive automatic cost-of-living adjustments to their salaries.
One of those lawmakers is State Senator Cris Dush, a Republican who chairs the governor’s committee and who refused to forward the COLA bill to the Senate floor for a vote. Dush did not respond to a request for comment.
As the effort to help retirees diminishes, their numbers dwindle. During the most recent year, 3,444 beneficiaries died, Muth’s office said.
Michael Hurd is director and senior principal investigator at the RAND Center for the Study of Aging. The Pennsylvania situation, he said in an interview, is an example of a broken promise by the state to provide workers with a pension that increases with the rate of inflation.
“The average age of these people is 83, so it’s clear they won’t return to the workforce to supplement their income,” Hurd said in an interview. “Individuals are not well positioned to deal with these types of risks. It’s unfair. This should not happen.”
Meanwhile, James’ daily costs continue to rise. “Yesterday I got my monthly trash collection bill and it went up $18,” she said in a recent interview. “A lot of the things I used to love doing, I don’t think about doing them anymore.”
Mostly, she says, she sits at the kitchen table watching the birds at her feeder.
This story originally appeared on NBCNews.com read the full story
