Hardship withdrawals from American retirement accounts are already up 252 percent since COVID-19. It’s so bad that the bar graph looks like a staircase. Most of the money has gone to halting evictions or foreclosure notices. A large part also goes to emergency medical bills and credit card debts, according to investment advisory firm Vanguard. Its study paints a bleak picture of a failed transition, for the rest of American workers, from defined benefit pension funds into defined contribution 401(k) accounts. Pensions give retired workers lifetime monthly annuities at a percentage of their previous salary, meaning that the benefit is defined up front. Defined contribution 401(k) accounts instead depend on the contributions made by the employee. Risk is transferred from boss to worker.

Today, the mean balances on 401(k) accounts are surging, yet median balances — offering more sense of the ordinary American’s condition — have flatlined at under $40,000. The spread between the two numbers is over $100,000. It’s the K-shaped economy playing out in retirement, or at least in retirement preparations. By off-loading the responsibility and the risk of future planning onto individuals, the issue of retirement itself has faded into the background.

On the other side of the Atlantic, more than a million French workers flooded the streets in protest following a 2023 increase in the retirement age. It exemplifies the political advantage to defined benefit pension plans: all workers are ensured a minimum standard of annuities to live on postretirement, without any financial literacy needed. But with 401(k)s we become our own financial planner, and the family unit is involuntarily made into a small business venture. A low balance or a hardship withdrawal indicates a set of personal rather than political failures.