Retirement anxiety brings battles for Biden in states like Pennsylvania

For 30 years, Jacqualyn James taught American history and psychology to high school students in East Stroudsburg, Pennsylvania, in the eastern Keystone State.

A graduate of Bucknell University, she became a teacher to support her family after she and her husband divorced. “I considered it a very important thing for young people to learn about the history of this country,” she told NBC News, estimating that she had taught 7,000 students by the time she retired in 1998.

During her teaching years, James regularly paid into her pension, the Pennsylvania Public School Employees’ Retirement System. “I expected it to last my whole life,” said the 88-year-old.

While her $25,000 annual pension has indeed stretched, due to an error in Pennsylvania law, it is now worth half of what it was when she retired. That’s because James and roughly 70,000 other retired public employees in the state haven’t received a cost-of-living adjustment in their monthly payments in more than 20 years. According to the Bureau of Labor Statistics, every dollar in pension payments James was promised when she retired is worth 51 cents today.

James and her unfortunate former colleagues retired before the passage of a 2001 state law known as Act 9 that increased pension benefits for public employees. Some of those 70,000 people whose average age is over 80 are experiencing significant financial hardship. Many do not have access to Social Security, as is the case with roughly 40% of all public school teachers nationwide, according to the National Association of State Pension Administrators.

Overall, the U.S. economy is humming along, the data show, a situation that typically favors a sitting president in an election year. But financial anxiety among voters in battleground states is complicating the outlook for 2024. In Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin, the so-called misery index, an economic measure that combines four years of inflation with the level actual unemployment rate is higher than in states that vote reliably Democratic or Republican. , a recent analysis by Bloomberg News shows.

Retired public employees like James aren’t the only ones facing pension hardship in Pennsylvania. About 2 million private-sector workers in the state, or 1 in 3 workers, do not have access to retirement plans at their workplaces, according to John Scott, director of the retirement project at the Pew Charitable Trusts, an organization non-profit that researches public policy. the issues. Indeed, if Pennsylvanians don’t save more, Pew researchers predict, the state’s taxpayers will have to provide about $14.3 billion over the next decade to support aging families with insufficient retirement savings.

“If you look at the data, how little people have saved for retirement is really a function of access to a retirement plan,” Scott told NBC News. “Two million workers without access speaks volumes for why there is a sense of uncertainty about their future.”

Even those who have put aside money for retirement are worried about their future. Victor Martens, 55, owns a small construction company in Mount Pocono, Pennsylvania, with his son and has been contributing regularly to his individual retirement account. “You save enough for retirement, but then you have inflation,” he said. “And the prices just keep going up.”

An afterthought

For decades, pensions like the one James relies on, or those offered by corporations, were the most common means of retirement for workers. Today, self-directed savings plans like 401(k) plans and individual retirement accounts, or IRAs, are the norm.

Amid this shift, many Americans have no retirement savings at all. Last fall, the Federal Reserve Board released an analysis of American 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 those retirement accounts is $86,900. dollars, says the analysis. For those closest 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 doesn’t necessarily mean a saver has enough money to retire comfortably. About two-fifths of American workers have insufficient 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 figure has improved since 2019, it concerns policy makers.

In Pennsylvania, the share of households with people 65 and older and an annual income of less than $75,000 — an indicator of financial vulnerability — is expected to increase 17% from 2020 to 2035, according to research 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 Scott of the Pew Trusts. “You can save for retirement outside of the workplace, but very few do — only 13% of Americans,” he said. “There are many steps you have to go through.”

Fifteen states have devised a solution to this problem — passing legislation to mandate automated government-run savings plans that make it easy for workers to put money aside for retirement. Oregon was the first to create an automated savings plan in 2017, and seven other states now operate such accounts, with seven more coming soon. Progress has been promising, Scott said — in the six states whose plans have been operating the longest, 850,000 workers have put away $1.3 billion for their pensions.

A bill to create such a savings plan for Pennsylvania workers was proposed in 2023. Under the program, known as Keystone Saves, workers would voluntarily send payroll deductions to a fund overseen by the state and operated by a third party financial firm. The bill has not yet passed both legislative chambers.

Walt Rowen, a third-generation owner of Susquehanna Glass Company in Columbia, Pennsylvania, is enthusiastic about Keystone Saves. He employs 40 people making ornamental grass and cookware at his factory, about an hour west of Philadelphia.

“When I first heard about it, I thought this would be absolutely perfect,” he told Keystone Saves. “Few people have worked for us for 25 to 35 years. We know the impact – when they finally retire and if they haven’t put enough money away, it’s hard.”

Rowen said he considered creating a 401(k) plan for his workers about 15 years ago, but found it would cost between $2,000 and $4,000 per employee to set up and operate. In addition, he said, many of his workers told him they would not participate.

Now, he says, offering such plans can help attract workers. “Over the years, I’ve had people say, ‘I’d love to come work for you, but I have a 401(k) plan at my job right now,'” Rowen said. Keystone Saves would solve that problem, he said. he.

$1.4 billion on Wall Street

The pending legislation would also address the problem of 70,000 retired workers like James who have lost cost-of-living increases in their income over decades.

No state. Katie Muth, a Democrat who represents the 44th District near Philadelphia, is one of several lawmakers sponsoring bills to give state pensioners the money she says the state owes them. “This is a group of people who served the public in various capacities,” Muth told NBC News. “This is a human rights issue.”

Muth and other lawmakers who support the COLA legislation estimate the costs at between $89 million and $125 million. A lot of money, to be sure, but Muth noted that the Pennsylvania Rainy Day Fund, the state’s reserve for a financial downturn, contained $6.1 billion last fall.

What’s more, Muth said, the retiree shortage is especially stark when compared to the fees that wealthy investment firms have generated advising pensions over the years. “You can’t say the system is working when retirees don’t have these cost-of-living increases, but their retirement dollars are being invested with $1.4 billion in investment fees for Wall Street managers,” she said.

James has written letters and emails to lawmakers about the problem, to no avail. Adding to her ire: Pennsylvania lawmakers get automatic cost-of-living adjustments in their pay.

One of those lawmakers is a state senator. Cris Dush, a Republican who chairs the government committee and has refused to advance 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 fades, their numbers are dwindling. During the most recent year, 3,444 beneficiaries died, Muth’s office said.

Michael Hurd is director and senior principal researcher at the RAND Center for the Study of Aging. Pennsylvania’s situation, he said in an interview, is an example of a broken promise by the state to provide workers with a pension that grows along with the rate of inflation.

“The average age of these people is 83, so they’re obviously not going back into the workforce to supplement their income,” Hurd said in an interview. “Individuals are not well positioned to deal with these kinds of risks. It is unconscious. This should not happen.”

Meanwhile, James’ day-to-day costs continue to rise. “Yesterday I got my monthly trash bill and it went up $18,” she said in a recent interview. “A lot of the things I used to love to do, I don’t think I do anymore.”

Mostly, she says, she sits at her kitchen table watching the birds in her bird feeder.