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Comparing the average Joe's retirement to members of Congress

Published: Monday, Aug. 5 2013 12:30 p.m. MDT

Members of Congress are ready to retire comfortably, but the average American is struggling.

Kevin Burkett, Kevin Burkett via flickr

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Many people think they'll never be able to retire.

Chris Kahn, research and statistics editor for bankrate.com, knows this because every time the personal finance website posts an article about retirement, people will leave comments on the story like, "What retirement?" or "I can't do it," or "What is this dream you keep writing about?"

Although average Americans may feel this way, Kahn has yet to see a member of Congress complain about their retirement benefits.

So Kahn analyzed and contrasted the retirement benefits of the average middle-class American with members of Congress. He says this comparison is for fun, but in the process may help people see where they stand when it comes to retirement.

And many are not standing on firm ground. The Employee Benefit Research Institute's 2013 Retirement Confidence Survey found that only 66 percent of workers have anything saved for retirement — down from 75 percent in 2009. More than half of workers report that they have less than $25,000 in total savings (excluding their homes and defined benefits plans).

"For the most part, the difference between average Americans and Congress is that members of Congress are federal employees," Kahn says. "The federal government has always been a great source of benefits."

Average retirement

Average Americans earning a middle-class salary for most of their lives will retire at 65 with initial Social Security benefits of $18,234 a year. Members of Congress, however, will get, on average, an initial Social Security benefit of $30,156 a year.

Kahn says this comparison is a bit of an apples versus oranges scenario: "You are comparing benefits based in one case on the average salary of workers all across the U.S. versus a very small group of people who make $174,000 a year minimum. On top of that, congressmen are getting other great federal benefits as well."

According to the Bankrate.com report, fewer than one in five private sector workers qualify for a pension. In the 1980s, more than four in five would have had pensions. Members of Congress have federal pension programs that pay, on average, $40,000 a year and up.

The only drawback for new representatives in the House is they will need to be re-elected in order to be a federal employee long enough to be vested into these pension plans.

"When you look at the private sector, it is amazing how much benefits have changed and how much they have declined over the last couple of decades," Kahn says.

Health insurance differences

It isn't just a decline in pensions. Health insurance in retirement is also on the retreat. In 1988, 66 percent of large firms had retiree health benefits. Now, according to the Kaiser Family Foundation, only 25 percent of large firms and 4 percent of small firms offer health benefits as part of their retirement plans.

"Most private firms offered these insurance plans that were like a Medicare supplement," Kahn says.

Members of Congress like other federal employees get health coverage through the Federal Employees Health Benefits Program. Seventy-two to 75 percent of the premium costs are paid by the government.

Easy investing

Another difference that Kahn says surprised him deals with how easy it is for members of Congress to make investments.

Most ordinary workers have a 401(k) in which they invest. With that investment they have management fees, they have administration fees, they have taxes — all of which can add up to 5 percent of what you are investing. If someone invests $1,000, it would be $50 in taxes and charges.

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