Bohemian South

RAY SUAREZ: You take us again and again in the book to key moments where things could have gone one way, but they went another. And one was the movement of tens of millions of workers from defined benefit to self-funded pensions. Tell us about that.

HEDRICK SMITH [Pulitzer Prize-winning journalist and author of “Who Stole the American Dream”]: You know, it’s amazing. Everyone talks about 401(k). Almost nobody knows why it’s called the 401(k). It’s because it’s that far down in the tax code. It is buried deep in the tax code. When it was passed, it was never intended to be a national retirement system. It was put in the tax code as a favor to Kodak and Xerox, who have headquarters up in Rochester, N.Y., by the Republican congressman Barber Conable, who came from that district. They wanted a tax shelter to give extra money to their executives. Fast forward. In the Reagan administration, somebody said, hey, let’s give that to ordinary people. Fast forward again. The mutual fund industry says, wow, we get ahold of all those billions of dollars of retirement savings, we can make a lot of money. Power to the people. Do it yourself. It’s been a disaster for most Americans. They don’t save enough. When they change jobs, they take their money out. When times get rough, as they have been recently, neither the company nor the individual contributes, with the result that the average balance is about $18,000 in a 401(k). And if you’re just on the lip of retirement, it’s maybe $85,000 for somebody who is in their 60s and who has been in the plan for 20 years. That’s nowhere near enough. People will say, if you have been making $50,000 a year, you need a half-a-million. So, we have got half of the baby boomer generation headed for poverty essentially in retirement, living on essentially only their Social Security.