Retirement security is a concept of the past. Nowadays, retirement insecurity is the focus of the economic conversation most Americans find themselves having – particularly those of us in the baby boomer generation.
The combination of serious dips in economy and public markets, together with the slow evaporation of more traditional corporate pension and qualified retirement savings plans, has hindered the ability of most Americans to put away the dollars they need to allow them to retire with dignity, much less a measure of economic comfort.
That in turn means that many Americans are now staying at work longer than they would have expected– or wanted – to. That sad reality is reflected in a recent Gallup report, showing that Americans’ expected retirement age is up four years from what it was a decade ago, and seven years more than what it was in the mid-1990s. Those who say they’ll likely retire after age 65 is twice what it was in 1995. Americans look at their diminished savings, their work-based savings plans (for those who even have one) that were hit by the recession, the cost of living, the children and/or parents they still need to care for, and they know they need to keep working to make it work.
Sadly, a new survey conducted by LIMRA, a financial services group, tells us 49 percent of Americans are not contributing anything to a retirement plan. Of course, many economists and media personalities tell us that, in order to really get the economy on track, we need to spend more. And that may be just a little bit true. But there is a fine balance between a nation that isn’t spending enough and one that isn’t saving enough. We’re the latter. And it’s a real problem for all of us, individually, and as a collective whole.
As many question whether Americans have put away enough money in the bank or 401 (k) plan to live comfortably, and as policymakers in Washington begin to think hard about how they can help encourage Americans to save as a way to lessen the load on federal resources, let’s also talk about what works.
At our company, Amsted Industries, the employees not only have a retirement plan – that plan owns the business. Amsted is organized so that it is 100 percent owned by the trust for its Employee Stock Ownership Plan (“ESOP”). That plan is entirely funded by the company. As our employees reach certain ages, they can diversify their share of the ownership into other investments. On top of that, our employees, like those of many ESOPs, can participate in 401(k) plans, with matching company funds, providing even more diversification. That’s real retirement savings.
Being organized as an ESOP shapes our culture too. As our Chicago-headquartered business – with operations across the nation and the world – has grown, our success has been driven in great part by the drive of the workers who have “skin in the game”. There’s a real difference in performance when workers know that they’re benefiting not only as workers, but building their retirements as owners – they’re working for themselves, not for a hedge fund, or to answer to an analyst on a quarterly conference call. We need to start talking about the stories across America of where retirement savings are happening, and thinking about how to bring those kinds of programs to more and more companies and workers. Everyone cannot be an employee-owned company. But more ESOPs would be a great thing to help boost retirement savings and allow millions more American workers to retire with dignity.
It is important to realize that there are retirement savings plans out there that do work, and have showed continued growth, even in a down economy. Rather than lament the lack of savings, perhaps policymakers and business leaders alike can do more to enable the spread of private ESOPs. That would make a meaningful difference for retirement security, and the economy.
If you have any further questions about how the ESOP structure works, please share in the comments section.
Stephen Smith is vice president, general counsel and secretary at AMSTED Industries, a 100 percent employee-owned private company headquartered in Chicago, Illinois.