Middle class Americans are witnessing the conversion of their retirement accounts into gambling pots used by Wall Street. The metamorphosis of Wall Street into one giant fraud ridden center moved by investment banking funds has slowly occurred over the last four decades. Average Americans have sat back over these years since they were given enough hope that they too, by investing in Wall Street managed funds can also become a multi-millionaire if they just try hard enough. Yet this was all one giant ruse and direct challenge to the middle class to basically allow a bunch of financial predators to siphon off any productive value from the economy. The 401k for example was a small unheard of investment item two decades ago. It has now become a larger part of the retirement pie for Americans.

The idea of not working and having a long retirement is actually rather new to this era:



When Social Security came about in the 1930s, it was largely a program to keep families from starving and from going absolutely broke. It was never intended as a long-term benefits program. Yet life expectancy has increased over time and now today, many Americans depend on Social Security as their primary source of retirement:

58 million Americans receive either Social Security or SSI. 37 million Americans receive Social Security benefits from reaching retirement age (this will grow with baby boomers retiring). And don’t think that middle class Americans are living it up with Social Security. The average monthly benefit from 53 million beneficiaries is $1,066 yet a large number of Americans depend on this as their primary source of retirement. Some recent surveys say that as many as 1 out of 4 Americans will depend completely on Social Security as their primary retirement source.

As fragile as Social Security might appear, the 401k has become the bigger scam for Americans. Many companies only offer a handful of investments to Americans to choose from and many are managed by the same Wall Street crooks that have caused massive volatility in the markets. The 401k has allowed many employers to push off the retirement question or even caring about their workers as they once did by:

-Using Social Security as the last stop-gap measure -Claiming they don’t need to have any sort of pension plan

Many companies have no loyalty to any worker. Over the decades Wall Street has brainwashed the public into believing that companies can do whatever they want to employees because Wall Street is just a “free market” where goods can travel where they want. But as we are now realizing, Wall Street is simply one selective syndicate that decides to transfer wealth to the top 1 percent of our country with really no work involved. It is manipulation and stealing of the productivity of the working economy.

The 401k was used with sophisticated charts put together by large investment firms showing Americans that if they only put away 5, 10, or even 15 percent of their income into the stock market through the magic of compounding, they too can retire rich just like their Wall Street idols. Of course, this has all been a sham and many middle class Americans are waking up. Over the last decade the stock market has done nothing but move sideways while miraculously, the banking sector has gotten bigger and bigger:

After 10 years, the S&P 500 is down over 20% even after the record breaking stock market rally. No compounding going on here. And when the market can fall 700 points in a matter of minutes, we start to realize that many retirement accounts are merely greasing the wheels of the Wall Street roulette game.

So this absurd notion of easy street has been pushed and sold by Wall Street to take away the responsibility banks and companies have for their workers. They like to claim all is a free market but have no problem taking trillions in taxpayer bailouts. Let us not forget that many Wall Street banks would be gone today without government assistance.

Let us dig deeper into the details of the 401k:

“(Bloomberg) The average 401(k) fund balance dropped 31 percent to $47,500 at the end of March 2009 from $69,200 at the end of 2007, according to a Fidelity Investments review of 11 million accounts it manages. The average balance of the Fidelity accounts recovered, to $60,700, as last Sept. 30 as the stock market rebounded.” “Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing lifetime payments, according to an institute-funded report today. The Washington-based institute represents the mutual-fund industry.”

I actually find this part interesting. The average retirement account balance is small relative to what is needed in retirement. How long will $60,000 last you without a paycheck? Think you can cover your rent/house payment, medical bills, food, college for kids, and other items for 1, 2, or even 3 decades? But many Americans, even after two decades of pure gambling on Wall Street still want to believe in that Horatio Alger myth:

“People value the tool of the 401(k),” Paul Schott Stevens, chief executive officer of the institute, said at a news conference in Washington. “They do not want government to take it away from them. They think the structure works very effectively.” U.S. direct-contribution plans, which include 401(k) and other employer-sponsored retirement programs, held about $3.6 trillion as of mid-2009, according to the report. They account for 25 percent of total U.S. retirement assets. Annuities, with $1.4 trillion, represent about 10 percent of U.S. retirement funds.”

The structure does not work effectively. The stock market has not gained over the last decade. You would have done better by buying CDs or sticking your money into the mattress over the past decade. This isn’t because we have no good companies in the U.S. On the contrary, we do and we still have the strongest economy around the globe. But Wall Street uses that as a way of leveraging to the max and putting solid companies at risk for raids and stock manipulation.

Yet Wall Street and the financial industry like to parade the “average” retirement account including the millions of the top 1 percent; the actual details are different:

Source: U.S. Census

While it is true that the average retirement accounts for many Americans is near $50,000 half of Americans have $2,000 or less in their account. Many middle class Americans are simply not prepared for retirement. Even with Social Security, this will only be a small amount. So with a large number of baby boomer depending on a smaller income in years to come, what does this do to our consumption based economy? Also, you have to sell your stocks to get the funds out of them so what is going to happen with millions of baby boomer selling stocks into a market where younger Americans have very little to save, not to mention save for retirement?

I found an article back in 2002 talking about the 401k and the same issues were present even then. But these articles are quickly forgotten after the stock market and housing bubble took off:

“While the fall in savings due to the stock market losses are causing a huge financial strain, many workers have no savings at all. According to a USA Today/Gallop Poll, more than one-third of adults say they have no money saved in any kind of retirement account and half of all households did not save a penny last year. “The average American household has virtually no chance to reach an adequate retirement savings in the next 50 years,” commented Christian Weller of the Economic Policy Institute (EPI).”

Ironically things are worse today. As we have shown in the above chart, the stock market is basically back to 2000 price levels. A large part of Americans have no savings and no retirement accounts so they are completely at the mercy at whatever is available. Keep in mind we now have 40 million Americans receiving food assistance. 401k accounts also had the phony allure of having “company” matching funds but this only went up to a certain point of income:

“Even when companies offered matching contributions to 401(k) plans, on average they only contributed 2 percent of pay, compared to the 6 to 7 percent of pay they typically contributed to traditional pension funds. Enron, like many companies, strongly encouraged employees to invest in the company’s stock. Thousands of Enron’s current, laid-off and retired workers lost most of their life savings when the company prevented workers from selling its stock held in 401(k) accounts, just as the stock price was plummeting.”

Much of that is gone today. Many companies are now using the recession as an excuse to even take away the company match. So now you are left putting money into the stock market while half of trades are basically computer generated trades in the big giant casino. Average Americans are basically putting their money into the one arm bandit of Wall Street. Yet someone as usual is taking the profits:

“Reports on account balances in 401(k) plans often give a more optimistic picture of retirement savings, because the assets of higher income workers skew the results. At the end of 2000, while the average account balance was $49,024, 44 percent of participants had balances of less than $10,000. In contrast to the plight of working people, however, the top executives of companies engulfed in financial scandals have no retirement worries, even in those instances where their companies have collapsed. In the case of Enron, Jeffrey Skilling made $78 million. Laid-off Enron workers received a mere $4,500 severance payment, no matter how many years they had worked for the company.”

This is a battle for the survival of the middle class. Many baby boomers who once believed Wall Street would be there to protect them will find they are out to sea with no paddle. Maybe this will wake many people up to take action but given the strong belief in the get rich myth, you wonder if many would rather be paupers as long as they can believe in the phony notion of big money with little work and effort. After all, Wall Street has mastered that game plan.

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