<i>The Big Short</i> and Your Retirement

If someone was lucky enough to have a public pension when the market crashed, a dignified retirement is still possible thanks to the fundamental structure of a pension. Meanwhile, if an employee's assets were in a 401(k) when reckless bankers brought our country to the brink of financial collapse, they might have ended up with nothing.
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"Banks took the money the American people gave them and they used it to pay themselves huge bonuses and lobby the Congress to kill big reform. And then they blamed immigrants and poor people, and this time even teachers."

On this somber note, The Big Short closes, having told the story of the reckless banks and Wall Street financial firms and hedge-fund managers who crashed the world economy in 2008. The Oscar-nominated film unpacks sub-prime mortgages, credit default swaps, and other Wall Street-imagined products that swindled American families out of their homes and their retirement savings.

While pension funds lost $889 billion and regular American families lost $11 trillion, one hedge-fund manager -- John Paulson -- made $20 billion for his investors and $4 billion for himself with the crash of 2008.

After driving state and local budgets into the tank, along with the rest of the economy, Wall Street bankers looked for someone else to blame for the flailing economies across our country. The targets they settled on? People who educate children, protect communities, and save lives. They decided these Americans and their pensions, not Wall Street, were to blame for the woes of state and local government financing.

Pensions experienced long-term success before the financial collapse and are clearly rebounding today. The aggregate funding level of state and local pension systems was 103 percent in 2001. By 2013, after market downturns in 2000-2002 and the crash of 2008-9, aggregate funding levels had fallen to 72 percent. 2014 was the first time post-recession that pension systems started to rebound, with aggregate funding levels ticking back up to 74 percent. The Center for Retirement Research (CRR) at Boston College projects that funding levels will continue to improve, up to a healthy 81 percent by 2018.

If someone was lucky enough to have a public pension when the market crashed, a dignified retirement is still possible thanks to the fundamental structure of a pension. Assets are pooled among workers and risks are shared between the employer and the employees. So workers can continue to retire and receive their promised benefits while the pension fund recovers its losses over the next ten, twenty, thirty, even forty years, as CRR shows funds are doing now.

Meanwhile, if an employee's assets were in a 401(k) when irresponsible and reckless bankers on Wall Street brought our country to the brink of financial collapse, they might have ended up with nothing.

Some people were forced out of retirement. Others had to work five or ten years longer than they had planned. Some people were able to recover their savings, but many didn't.

This should come as a surprise to no one. The 401(k) was designed to only benefit millionaires and billionaires who have the money to gamble on Wall Street. The teacher, social worker, and police officer's fixed income does not generate the capital to win big in the stock market, leaving them with little or no savings to rely on when leaving the workforce -- with or without financial crisis.

What we learned in The Big Short is that shady financial schemes and little to no oversight led to economic ruin. After years of reckless behavior by bankers and brokers -- as Ryan Gosling's character says -- "only one single banker went to jail" while taxpaying families were left to pick up the pieces.

Our elected officials owe the American people the same protections afforded to Wall Street and that means ensuring everyone's nest egg is safe. If more Americans can retire with dignity, our economy will be stronger and taxpayers will be protected.

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