Retirement Accounts and Extractive Investment Chains

At Just Futures, our mission is to serve everyday people, who deserve both to retire with dignity and to align their retirement investment dollars with their values. You can read about how we are striving to fulfill this mission here.

The piece below – an excerpt from Building a Social Justice Investment Chain – explains that many Americans are unable to invest for retirement and that, for people fortunate enough to be able to invest, our current financial system pushes them to put their money toward exploitative enterprises. This research helps explain why, in 2022, longtime nonprofit workers and movement activists striving for an economy that works for everyone founded Just Futures:

Extractive Investment Chains

Unfortunately, most US wealth is locked in extractive investment chains. Just Futures defines an extractive relationship as an exploitative dynamic – between people or between people and the environment – in which wealth, value, or resources are taken from one party for the benefit of another. We believe such a relationship is inherently unsustainable, because whatever is being extracted is unable to replenish. In an extractive investment chain, actors seek to maximize profits by any means, regardless of the negative impacts that their behavior may have on people or the planet. As investment chains are designed by the powerful people within them, actors also seek to reinforce their own power by how they structure their transactions within the investment chain.

Retirement Accounts and Extractive Investment Chains

Different types of brokerage accounts — like Individual Retirement Accounts (IRAs), 401(k)s, and 403(b)s — are designed to incentivize people to save money for retirement. While the various sorts of retirement accounts differ in a number of ways, they are all similar in that they provide some sort of tax advantage — meaning they allow people to invest pre-tax dollars or withdraw tax-free earnings, as long as certain conditions are met — and that they penalize account holders who attempt to withdraw funds before they reach age 59 ½. Defined contribution plans — like 401(k)s and 403(b)s — are workplace retirement plans that employers offer their workers. Often, employers will contribute to defined contribution plans in addition to employee contributions.

These accounts allow people to invest in publicly traded securities like stocks and bonds, usually through mutual funds or exchange traded funds (ETFs). While once common, pensions and other defined benefit plans that guarantee a certain level of payout are increasingly rare. And, while the United States does have social safety net programs for elders — like Supplemental Security Income (SSI) and Medicare — the benefits they offer are often not adequate to meet older people’s needs. This means that workers’ long-term financial prospects are increasingly determined through Wall Street and their own ability to navigate the ups and downs of the stock market.

Retirement accounts are the primary way that people outside of the top 10% are able to invest. Unlike the uber-wealthy, however, most people are just hoping to save relatively small amounts of money to help them make ends meet once they are no longer working. The bulk of this saving happens in defined contribution plans, like 401(k)s and 403(b)s. This system, however, can have many shortcomings.

For instance, one quarter of Americans don’t have any retirement savings at all. Many people simply don’t earn enough to support themselves in the present, let alone save for the future. There are also many people, such as the incarcerated, the undocumented, or those who do care work that is not remunerated by the market, who are unable to save for retirement because of deep structural barriers.

This has serious ramifications. Community members enter retirement without adequate resources to provide for their own care. Sometimes younger family members provide care themselves or take on the financial cost associated with eldercare, making it more difficult for them to save for their own retirement. Without an intervention, our elders can slip into poverty and lack adequate access to care.

What’s more, existing retirement plan regulatory requirements hinder investment in small, locally-owned, regenerative businesses. Instead, retirement dollars are largely trapped in an extractive investment chain, consisting of extractive intermediaries and extractive companies.

This dynamic is particularly painful for nonprofit workers in the social justice sector. Many spend their days fighting the excesses of corporate capitalist firms only to be forced to hand their life savings over to those same firms. Ironically, social justice workers’ individual financial livelihoods become tied to the financial performance of the very institutions that are damaging communities and the environment.

Let's make finance work for us.

Historically and to this day, Wall Street has disproportionately served a small, wealthy, and privileged group. We want everyone to be able to retire with dignity, which is why we encourage you to invest. And if you, like us, value racial, social, and environmental justice, then we feel confident that our services align more with your standards than other retirement plan administrators.

If your employer doesn't offer a retirement plan, or if they contract with a different administrator, we’d love to show you the Just Futures advantage! You can reach us at info@justfutures.com.

Just Futures uses rigorous analyses to provide you with progressive investment options. Meanwhile, we are working to improve our current financial system to be able to, over time, offer you increasingly better places to put your retirement savings.

Resources on this page:

Kaissar, Nir; Yes, 401Ks Are Broken. Let’s Fix Them; Bloomberg; 2016.

Blancato, Bob; Congress Takes A New Look At The Safety Net For Older Adults; Forbes; 2019.

Federal Reserve; Economic Well-Being of U.S. Households in 2021; 2022.

Federal Reserve; Report on the Economic Well-Being of US Household in 2018; 2019.

Federal Reserve; Economic Well-Being of U.S. Households in 2021; 2022.

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation or advice of any kind. The information contained herein may contain information that is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Just Futures explicitly disclaims any responsibility for product suitability or suitability determinations related to individual investors.

There is no guarantee that integrating Environmental, social, and governance (ESG) analysis will improve risk-adjusted returns, lower portfolio volatility over any specific time period, or outperform the broader market or other strategies that do not utilize ESG analysis when selecting investments. The consideration of ESG factors may limit investment opportunities available to a portfolio. In addition, ESG data often lacks standardization, consistency and transparency and for certain companies such data may not be available, complete or accurate.

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Published Nov 8, 2024