Working poor wary of Bush's proposal
By Jonathan Weisman
Washington Post
WASHINGTON — Brenda Ellis' day begins at 6:30 a.m., when she rousts her 11-year-old son, Imani, from bed, hustles him into the kitchen for breakfast and to the school bus by 7. Tianna, 13, and Dikia, 17, quickly follow. Then she's off, some days to a substitute-teaching job in Prince George's County, Md., others to tax clinics for the working poor, where she is earning credit for a hoped-for career in accounting.
If it's a school night for her, Ellis, 41, rushes home to her Landover, Md., apartment to quickly fix dinner before bolting out at 5:45 p.m. for the half-hour drive to Strayer University and an accounting class that ends at 9. If it's tax time, she may not leave the clinic until 10.
In his push to add individual investment accounts to Social Security, President Bush maintains that people like Ellis have the most to gain — the working poor, living from paycheck to paycheck. With such accounts, they would have a nest egg they could invest in stocks and bonds. For the first time, they would have a sense of ownership and a stake in their nation's economy and financial markets.
"I'm 1,000-percent convinced of this: The president cares the most about this $10-an-hour person," said Allan B. Hubbard, director of the White House National Economic Council. "And what he gets most irritated by is when it is suggested, 'Oh the $10-an-hour person isn't sophisticated enough to deal with a personal retirement account.' "
But between work, daycare and the endless battle to lift themselves up, some members of the president's would-be ownership society say they would just as soon not have another thing to worry about. At least that was the case for several who in recent weeks visited a Southeast D.C. tax clinic run by ACORN, the Association of Community Organizations for Reform Now.
"When you know you're entitled to Social Security, you know it's going to continue to come until you breathe your last breath," said Sondra Gilbert, a former D.C. government worker who had been jobless since 1999. "But if I start putting the few dollars he's going to let me put into an account, I could run out of that in a year or two, or whatever. Then I'm back on what? A homeless shelter?"
"I like the old way," said Joan Singletary, 52, a custodian deployed here to the Bureau of Printing and Engraving by Goodwill Industries. "I like receiving a check. That way, I wouldn't have to tamper with the money on my own."
Behavioral economists say the White House should not be surprised by that attitude. Numerous studies of retirement savings programs such as 401(k) plans have found that choice may be the last thing people want. If employees must sign up for their 401(k) plans, they often don't. If enrollment is automatic unless they opt out, most stay in.
If the default savings option is a conservative money market, that's where their money goes. If the default is a portfolio of stocks and bonds, they'll take that.
"Having a stake in the economy or financial markets, that's heavy rhetoric, but it's not clear it's worth much to most households," said David Laibson, a Harvard University economist who studies retirement savings behavior.
Laibson examined the 401(k) contributions of the one group with nothing to lose from participating, workers older than 59 who still qualify for matching contributions from their employers but can also withdraw money from their pension plans at any time with no penalty. They tend to be experienced and educated, yet 40 percent of such workers do not participate in 401(k)s.
"That's just mind-boggling," he said. "That's money on the table that these households are just overlooking."
In a society of specialization, people would rather trust their investment and savings decisions to perceived experts, just as they trust their car repairs to mechanics and their legal problems to lawyers, said Brigitte C. Madrian, a professor of business at the University of Pennsylvania's Wharton School.
"People are wary about taking control of their Social Security, just as I'm wary of fixing my own car," she said.
That is especially true among the working poor, whose experience with choice may be particularly bad, Madrian said. They are not likely to believe the government is going to give them the best investment options for the Social Security accounts.
Each night, Ellis kisses the kids goodnight, checks their homework, does a little of her own, has dinner, then climbs into bed by midnight, to start over 6 1/2 hours later. Somewhere in her busy life stews roughly $13,000 in retirement savings from her 14 years at the Postal Service, in accounts that she doesn't really understand or monitor.
"I don't know what's going on with it," she said one night at a tax clinic in Washington. "I just know I have these three accounts, so I just say, 'Let's hope and pray. Let's hope and pray it's not going into Enron. Let's hope and pray it's not going into Tyco.' It's just hard to absorb all I'm supposed to absorb."
