Own Your Own Retirement
As demands on retirement plans increase, American workers will benefit from market-based accounts they control.

By Herman Cain
Free Market Project National Chairman
Jan. 18, 2006

     There are few guarantees in this life. The most widely recognized are death and taxes, but it’s also guaranteed that government isn’t as concerned about your well-being as you are. Liberals claim to support “guaranteed” retirement benefits, regardless of the cost or our ability to provide them. The reality is that guaranteed benefit plans – whether provided by government or private companies – will not be able to survive the coming generations.

     Workers at IBM, home of the nation’s third-largest pension program, are among the latest to get the wake-up call, proving that a company doesn’t have to be in bankruptcy to see the light. We’ve seen all sorts of companies, from General Motors Corp. to Delta Airlines, struggling lately with their pension programs and health care benefits. Unionized workers from the auto assembly line to the New York City transit system have brought the fiscal realities of defined benefit plans into the spotlight with their demands.

     IBM made an important shift to preserve its financial health, which in turn provides jobs for its workers and products for customers. Its retirement program is changing from a defined benefit program, which pays monthly benefits from the company for years on end, to a defined contribution program, in which employees put away some of their earnings and the company matches contributions. IBM estimates that the shift will save the company up to $3 billion over five years.

     Interestingly, many politicians and the media are quick to blame big business for “breaking promises” to workers. CNN’s Lou Dobbs reminded viewers of his January 6 show that “IBM is one of the largest, most profitable corporations in the world … But this company still says it needs to cut costs by ripping up a key financial contract with its middle class work force. This is just the latest firm to go back on its pension promises.” However, the company has said current retirees already enjoying their benefits won’t be affected. The move is important for current and future workers to have a financially healthy employer that can still give them benefits – so they won’t really get left out in the cold.

     Today’s business critics are the same ones who for years defended the government’s spending of Social Security funds on frivolous projects, all the while mortgaging our grandchildren’s retirement. Several months ago, liberal politicians and pundits were imploring the federal government to find ways to take care of us in our old age – while of course not changing Social Security’s funding structure. Now, companies realize that putting their employees in charge of their own retirement decisions is common-sense management. Congress would benefit from more of this real-world thinking.

     The problem is the same whether it’s Social Security, public retirement programs or private pensions: they’re all under-funded. The old system of defined benefits has outlived its sustainability. A Bureau of Labor Statistics (BLS) study of younger baby boomers showed that they changed jobs an average of 10 times between the ages of 18 and 38. The days of a lifetime with one employer are gone for many. Instead of a gold watch from your employer or a monthly check from the government, employees will soon demand a retirement account they can control. A 401(k)-style plan allows workers to take their savings with them if they make those 10 job changes.

     Not only are people changing careers, but they are living longer. The pension plans of yesteryear just aren’t equipped to handle the burden of the additional golden years, and businesses are paying attention. The BLS reported in 2005 that 42 percent of workers in private industry are now in defined contribution plans, like 401(k)s. Just 21 percent remain in defined benefit plans.

     Working hard and taking pride in one’s achievement; providing for one’s family; having a stake in one’s community – these are all values most Americans share, and they mean owning up to responsibility. Taking responsibility for your retirement means you are independent from government meddling and an unhealthy reliance on your employer. As we watch Delta and Delphi slip into bankruptcy, worker independence becomes more attractive and necessary.

     Some pundits cast doubt on the working man’s ability to plan for his own retirement. But it’s time we showed them that we’re not stupid. All it takes is some attention to the matter, and Americans can prove themselves responsible.

     Meanwhile, members of Congress could learn a lot from business leaders who are making tough choices. If they would help workers by restructuring Social Security and providing access to another individual means of retirement savings, we would be well on our way to taking care of ourselves. The more economic freedom we have, the better choices we will make. Death and taxes may be unavoidable, but a national retirement crisis isn’t.


Herman Cain is the former president and CEO of Godfather’s Pizza, Inc. and currently is CEO and president of T.H.E. New Voice, Inc., a business and leadership consulting company. He is the National Chairman of the Media Research Center’s Free Market Project.