BY GAREN YEGPARIAN
Imagine starting off the 2014 New Year knowing that you’re going to get screwed by your own government in yet another way. That’s what our compatriots in the Republic of Armenia (RoA) face starting January 1.
This time, the injury is being delivered via a “reformed” pension plan. The new system will put Armenia in the “illustrious” company of Chile, El Salvador, Mexico, and Kazakhstan— all countries noted for their extremely caring attitudes towards their citizens, NOT!
What will now happen is that everyone who is actually employed in the country will be OBLIGATED to contribute 5-10% of their income into the equivalent of what we know in the U.S. as a “401K” plan. The preexisting system was a little bit more like the U.S. Social Security program in that everyone contributed part of their pay and, upon retirement, received a pension based on years of employment, only (in this way it is different from Social Security which pays out based on one’s income, not just years of service).
In the interest of avoiding contentiousness about the merits of 401K plans (which I do not support), let’s just grant, for the sake of argument, that they represent a good approach. But, what goes into that approach?
Since 401Ks involve investing, usually in stock markets (sometimes through mutual funds), the first thing that becomes obvious is anyone using this type of system must be familiar with how such markets operate. This is not a skill that is easily acquired, nor is it one that everyone can appropriately master. That’s why the professions known as financial and investment advisors exist.
Now, not that I know for sure, and I don’t want to sell our eleven thousand square mile republic short, but I suspect not too many of those advisors exist there, given the Soviet era. Add to that the absence of extensive awareness, collectively, culturally of how markets fluctuate, when to buy and sell— UNEMOTIONALLY, the sometimes usurious fees charged by advisors and other handlers of people’s precious retirement funds, and the generally corrupt atmosphere that prevails, and you have a wonderful recipe for impoverishment upon retirement. Now, complicate that some more with the simple fact that some people will hit retirement age when the markets are doing well, while others will hit that age when they’re doing poorly.
Just look around the U.S. and you’ll learn of the dissatisfaction, or at the very least, worry, over how 401K plans are turning out for their owners. Then think about how bad an idea this type of approach is for the RoA. I can already hear the bleating as our hardworking compatriots are fleeced by unscrupulous operators.
At this point, I usually recommend some action to readers, but this time, I’m stymied. What can I ask you to do? Even though the four opposition parties in the RoA’s parliament are opposed to this foolhardy change in the law, they are vastly outnumbered by the governing Republican Party. So appealing to members of parliament is pointless, the Republicans are dead set on harming the population.
The opposition has filed suit in the RoA’s supreme court. Maybe we can write to them.
Regardless, if you think of an appropriate way to make your disapproval heard, please do it, and share that way with others.