Retirees Will Face Dire Straits [Baby Boomers to force following generations to suffer]

This nation faces a massive economic crisis -- indeed a social catastrophe -- that some experts even say will be among the worst the country's ever seen.

Much has been said about how the looming retirement of 76 million baby boomers will stampede Social Security, which is expected to start running out of money in 11 years. We almost joke about senior citizens eating dog food. Maybe that joking is the only way we can keep from crying.

But Social Security is just one piece of a cruel puzzle. It's not until you look at the big picture that you realize how dire the crisis is. The pieces won't fit together without a lot of pain and anguish for a lot of people.

If you think it's time to stop reading, this is a wake-up call you can't afford to ignore.

By nearly every expert's forecast, half to three-fourths of the next few generations of retirees will live on the edge financially or in desolate poverty.

Today's children and most of today's workers almost certainly will pay steeply higher taxes to cover promises to retirees. Taxes will rise while workers are told they need to save more and work into their 70s to avoid the plight.

"The cupboard is bare compared to what we've dreamed of," said Phil DeMuth, a California investment adviser. He's co-written books with commentator Ben Stein. His newest is "Yes, You Can Still Retire Comfortably: The Baby-Boom Retirement Crisis and How to Beat It." But beating the crisis, he says, involves choices such as delaying retirement and tapping home equity.

"It's a terrifying problem," DeMuth said. "Politicians don't want you to think about it. Your employer doesn't want you to worry about it. ... It's very depressing, and it's not going to get any better."

By most estimates, about a fourth of future retirees will be in good financial shape. They have significant savings, insurance, pensions, good health and are married and own their home, said John Rother, director of policy and strategy for the AARP in Washington.

Another fourth face an impossible future because of little savings, no home, no insurance and no spouse, he said.

The remaining half will be "on the edge," he said. Best case: Many will struggle. Worst: Most will collapse financially.

Study after study shows roughly the same bleak outlook. An analysis this month by the Center for Retirement Research at Boston College found that, under the best assumptions, 43 percent of households will have trouble making it in retirement. That assumed people worked until at least 65 and lived partly off the value of their homes. And it didn't add health-care costs, which researchers said were too unpredictable to even estimate.

"Unless Americans change their ways, many will struggle in retirement," said Alicia Munnell, director of the study.

Cleveland certified financial planner Ken Robinson is just as grim. "We need to get ready for parts of America to turn Third World and where you need your extended family to support you financially," Robinson said. "I hope I'm wrong, but I don't see us on a course that protects us from that."

Survival for Paula Tinsley, 53, of Maple Heights, Ohio, will mean delaying retirement until she's about 80. That's when she'll pay off the house she and her 70-year-old husband bought three years ago.

Tinsley, a manager of a Shell convenience store in Willoughby, Ohio, has a small 401(k) and small pension. "If I had it to do all over again, I would have started saving earlier," she said. She'll depend heavily on Social Security -- which is the most prominent part of this crisis.

Social Security is on course to start paying out more than it takes in by 2017. The money built up before then will be gone in 34 years, just about the time today's 30-somethings start reaching in their mailboxes for a benefits check.

Even now, Social Security pays an average of only about $12,000 a year to a retiree.

The Medicare system that retirees rely on for health coverage starts to run out of money this year. It'll go broke in 12 years.

"We may have already committed more physical resources to the baby boom generation in its retirement years than our economy has the capacity to deliver," Alan Greenspan said last year, when he was chairman of the Federal Reserve.

Pension plans, which about 40 percent of today's retirees rely on, are crumbling. While about the same percentage of people are covered by some kind of work-related retirement plan today as in years past, the type of coverage has changed. Only 25 years ago, 80 percent of private-sector workers in retirement plans had pensions. Today, that's only one in three, with most of the rest instead given the chance to save in an individual investment plan.

Even workers who have pensions are at risk, given how many plans have run into trouble.

Personal savings will be even more important to future retirees, but last year Americans spent more than they brought in -- meaning no savings -- for the first time since the Great Depression.

A third of all workers aren't saving a dime toward retirement, according to the Employee Benefit Research Institute. Most who are saving don't have nearly enough. Among workers 55 and older today, 52 percent have less than $50,000 saved for retirement, the institute found. (You need $350,000 to $400,000 at retirement to have an income of $30,000 a year.)

Only a fourth of workers 55 and older have $250,000 or more. If that much money sounds good, stomach this: It's projected that a 65-year-old needs $210,000 in savings just to pay for out-of-pocket medical expenses and supplemental insurance.

But wait: The typical man who makes it to 65 has a 50 percent chance of living until age 85. A 65-year-old woman has the same chance of living until age 88.

That's 20-plus years of a life that's far from the warm-and-fuzzy images of spending our golden years traveling and playing golf.

The game plan for many is to work into their 70s or 80s. Those will be the lucky ones. About 40 percent of people retire involuntarily because of illness or layoff.

Social Security is 40 percent of the income of today's retirees and the only income for one in five retirees today.

How did we get to this horrifying point? It's the convergence of five phenomena -- all of which were preventable or, at least, foreseeable:

-- The flood of baby boomers and a slowing birth rate since. Between now and 2030, the number of people over 65 will double. The number of new workers paying into Social Security and Medicare will increase only 20 percent.

-- Longer life spans. Life expectancy is about 13 years longer for children today than when current retirees were born.

-- A stock market that lost value for three straight years -- also a first since the Great Depression.

-- Procrastination by political leaders. Washington saw the warning signs in the 1970s and 1980s, but passing the buck has always seemed easier than real solutions.

-- Procrastination by individuals. Experts have begged us to spend less and save more. But the median retirement account holds $10,000 -- barely more than the average household has in credit card debt.

Between 1946 and 1964, the number of U.S. births soared. Instead of two children for every woman on average, there were three or four.

Births declined rapidly after 1964, when birth control pills became widely available and women entered the work force in greater numbers.

Since then, the birth rate has been about half as much as at the height of the baby boom. That means fewer new workers to support Social Security for the growing number of retirees.

The age for receiving full benefits like Social Security and Medicare had always been 65. That was no big deal at first, because until 1950 the average life expectancy for male babies was less than that.

Now life expectancy is 75 years for men and more than 80 for women. Credit medical advances as well as healthier lifestyles.

All this adds up to far more people living in retirement. In 1950, Social Security had 16 workers paying in for every retiree. Now, the ratio is three workers for every retiree. By 2030, it will be 2-to-1.

Unless benefits are cut sharply, which isn't expected, workers will lose a bigger chunk of their paycheck to support retirees, said Matt Moore of the National Center for Policy Analysis. "People in their 20s and 30s will be most affected."

Social Security always has collected more each year than it pays out. But the government borrows from that surplus to pay for other things. When Social Security starts paying out more than it collects, it will need money back. The government will have to raise taxes or borrow more. Or it could cut benefits.

To fix the problem now through the bluntest methods, we would have to either raise Social Security taxes 16 percent or cut benefits 13 percent, said Bob Rosenblatt, a former journalist who focused on retirement issues and is now with the National Academy of Social Insurance in Virginia, a nonpartisan group of more than 700 experts in government benefit programs.

Most experts believe Social Security will get fixed, no matter how bitter the medicine. If you look really hard, you can find a couple of other rays of hope.

-- For retirement-age boomers who want to keep working, there should be jobs available. Today, there are more people who want to work than there are jobs. By 2014, it'll be the other way around, the government says.

-- More people overall are saving money than a decade ago. Among workers of all ages, the percentage who have something saved for retirement has increased from 57 percent in 1994 to 70 percent in 2006.

Fat lot of good that saving did for some people. Just when the first baby boomers were within 10 years of retirement, the stock market tanked. Not only did most investors suffer 30 percent to 50 percent declines (which they haven't fully recovered since), but economists and financial planners were spurred to rethink projections.

For stock investments, they used to forecast annual returns of 10 percent to 12 percent a year. Now, most project 7 percent to 9 percent, said economist LeRoy Brooks of John Carroll University. "That's a huge difference," he said.

Brooks calculates that a 30-year-old could invest $840 a year at 12 percent and have an income of $50,000 a year in retirement. But if the return is only 8 percent, she'd have to invest $2,700 a year to get that same income.

The same principles apply to pensions, so many employers are caught without nearly enough money in their pension funds based on lower earnings projections. That includes the government. Standard & Poor's said federal employee pensions are short about $4.5 trillion. Taxpayers could be forced to pay that bill.

John Strangfeld, vice chairman of Prudential Financial Inc. in New Jersey, believes many pension plans will be in trouble in the next 10 to 20 years. The trail already includes IBM, General Motors, Hewlett-Packard, Sears, Delta Airlines, Polaroid and Goodyear.

Mark Iwry, a senior fellow at the Brookings Institution in Washington, said shutdowns or freezes are rare and most pensions are going along OK. What worries him, though, is that the freezes -- in which workers no longer accumulate pension benefits, though they may be instead given the chance to save in a 401(k) -- have spread from sick companies to healthy ones.

And many pension plans could go bankrupt. The Pension Benefit Guaranty Corp., which insures workers whose company plans go bust, could be under a "mega-threat," Iwry said, because it wasn't designed to bail out whole industries.

Retirement experts are most vocal and exasperated about what Washington hasn't done.

Once it became obvious 20 or 30 years ago that the birth rate was slowing and life expectancies were increasing, researchers waved warning flags. Changes could have come then with minimal pain.

Brooks, the economist from John Carroll, said politicians "have been playing to the populace by giving them what they want. People always say they're paying too much in taxes and so we cut taxes. They say they want more benefits, so we increase benefits."

Any solutions now will be extremely painful and unpopular, but politicians need to face the crisis, he said.

With one out of three people not saving anything toward retirement, and most of the rest not saving enough, we must be waiting for the retirement fairy.

Saving for retirement is a fairly new phenomenon. As a society, we're just not good at it, said Kevin Myeroff, a certified financial planner and author of the 2001 book "Countdown to Retirement."

"We carve out so much of our money for things we didn't used to need," said Robinson, the Cleveland planner. "Is it so hard to imagine life without TiVo?"

For those who don't have the money, it's easy to reach for the credit card. Charge-card debt (an average of $9,300 per household) has hit millions of people.

Myeroff isn't sure what it will take for Americans to face reality. "People think this is all just going to work out," he said.

"We've known this for decades," he said. "We're getting closer and closer to the day of reckoning."

(Teresa Dixon Murray is a reporter for The Plain Dealer of Cleveland. She can be contacted at tmurray@plaind.com)

>IMO there will be a cultural backlash demanding that the elderly die off earlier as to not sap others<

I've watched a cousin tap into the savings of a grandmother with dementia, draining accounts up into 6 figures. The sight was ugly, but there was this: she was setting an example to her children how she should be treated if she became vulnerable.

It's inevitable. You will age. And if your thinking prevails, watch for someone to demand you die for their convenience.

>Baby Boomers took over education and educational instruction by the 80's. When you wonder why kids can't add or read and don't feel bad about it, it's because they were never held up to high standards.<

All this seething hatred directed at a non-homogeneous age group reads like Democrat rantings directed at Republicans--heavy on emotion.

You can murder us all tonight, but you'll be left with your own characters to live with.

>"What are we supposed to do with the people who will never or can never become highly skilled? "
What do you mean "we"? <

In your case, what happens to all the people who used to manufacture film as silver halide technology implodes?

Do you make sausage out of the ones who cannot learn a new skill or who don't have the mental equipment to do more than assembly line work? Do you let them drop dead of starvation along Lake Avenue, begging bowls in hand?

Do you pretend they don't exist, since you have a portable skill, and you will survive in some fashion? You have what you want, so what else could matter? Is that it?

Rochester has been over for 20 years. Get out now. There is a world beyond the boundaries of Monroe County.

There has been a mass exodus to the Carolinas. A friend who moved there returned to a visit and told us they met 15 families from Western NY within a 5 block radius of their house in Charlotte. My wife would love to move to a "red' state.

My first choice would be to stay with my current employer until age 56 when my pension would be 85% of its maximum value, then retire and find a teaching position at a University in the south. I just hate to walk away from a pension I've worked 25 years for thus far... The big question is whether my employer goes into Chapter 11 before I can reach the 'big jump' in pension value that comes at 30 yrs. But you're right - there is a big world and a lot of opportunity outside Monroe County.

>It's sort of wierd and sad. All the talk of cutting off the old<

This is not a new attitude. A fellow boomer buddy of mine noticed it in the junior high where he worked and his wife taught math. He noted the prevailing attitude among the kids, and called them the "cash and carry generation". He predicted that they would literally throw away anyone they deemed worthless, or an impediment to them.

>But you're right - there is a big world and a lot of opportunity outside Monroe County.<

I bailed in 1982.

You don't have to go very far to find a better climate, lower taxes, lower cost of living, and best of all, corporate cultures that are not in the death throes of final collapse. It's depressing working for an imploding corporation. Get out before you are too old to be considered for a top job or you must take a huge pay cut to get any job at all.

It isn't going to get any better there.

In your case, what happens to all the people who used to manufacture film as silver halide technology implodes?
Do you make sausage out of the ones who cannot learn a new skill or who don't have the mental equipment to do more than assembly line work? Do you let them drop dead of starvation along Lake Avenue, begging bowls in hand?

As you might guess, I have a 'dog in this fight.' I don't think there is anyone here who used to manufacture film that cannot learn a new skill. First, I would point out that there is no one who will work harder to look out for their interest than they can do themselves. Second, I would agree with you (RSteyn) that there is a big world outside Monroe county - and some of us will have to move. I've been a 'digital' guy since before it was fashionable. I'm still employed because for years I have taken lemons and made lemonade. Each of us can look at what we do and see what skills can be built on and improved. The reports I have heard from displaced workers is that the outplacement services provided by my employer have been stellar. Those who have attended the 'career planning' workshops have had nothing but good things to say about them.

I had a friend who was a technician in our department several years ago. He was very good at what he did and we had been encouraging him (without success) to go back to school. He was laid off a few years ago. He was the 'poster child' for how to handle the situation. He managed his finaces well, stretching his severance package over two years. He found a grant from New York State for displaced workers. By prudent management he was able to attend school and get his B.S. in three years. He found a nice job at a higher salary in the Corning area. The key is that he took control of the situation, moved out of his comfort zone, and did what was needed.

>And if your thinking prevails, watch for someone to demand you die for their convenience.
It's not my thinking. It's simply my prediction. Gen-Xers came to adulthood in a world where abotion was "legal". They are used to death as convenience. There are many who think otherwise. But most are numbed to the culture of death.<

Flaming hogwash. As a society, we are insulated from death. We deny it. Meat doesn't come from the bodies of animals, it comes shrink-wrapped from glistening, sanitary stores free of the blood, urine, and fear of the slaughterhouse. We commonly cannot even execute the most cruel and inhuman of serial killers.

However, when it comes to greed, nothing tops the demand that the old shuffle off because they are inconvenient to the young. This isn't about a death-culture. This is about a ME-ME-ME culture. Boomers largely grew up in herds and had to share. Gen Xers are analogues of the "Little Emperors" in China, the only children who happen to be sons, pampered and made rottenly spoiled. They want it ALL and they want it NOW, and they want it at ANY cost. Grandma needs a new knee? Blow her head off, I want HDTV.

>From the 'Big Yellow Box'?<

My creepy ex worked there, probably still works there if he hasn't died of AIDS.

Bail. Your other concern is that the length of your time with Kodak with label you with the impression that you, too, are stuck in the past. If you've been using ancient equipment all these years, you are going to have a tough sell convincing people that you really are current. For the best jobs, you need current experience with current technology and software--reading the literature is good, but does not fill the gap.

You cannot do your best work if every day you go in the door wondering if this will be your last. I had contacts inside Kodak as late as 1990, and I know about the list of buildings in Kodak Park from 200 to 1 in order of eventual closure. Don't think it cannot happen. I'd also be sweating the contamination present in all the old Kodak acreage and in the residential areas along the boundaries--someone will pay for the cleanup, and you can bet your life it won't be whoever the current CEO is, brought in to 'turn things around'.

The generation of never having made a sacrifice to the country ..

What generation do you think fought in Persian Gulf and the Iraq Wars? Gen X!!! So don't tell me my generation hasn't made sacrifices for this country, you ingrate. If your generation wants to make euthanasia legal, maybe we should just sit by and let them (afterall, with only 43 million or so Gen X, it isn't as though we have enough of a voting block to block it.)

So, I eat what I want to eat (be it pork, beef, real butter and real sugar) ...

A little off the topic, but that is probably a healthier diet than the US gov't (and those liberal, PETA loving, vegan wackos keep cramming down our throat. So here's to a long life caught up in the ponzi scheme of social security, hehehe.

Nourishing Traditions: The Cookbook that Challenges Politically Correct Nutrition and the Diet Dictocrats

ENOUGH! No, I havent read the article, no, I haven't read the replies, but I just don't care!

WE ARE NOT THE ENENY! Get it? Examples:

Social Security: FDR -- born in the 1800s.
The Peace Movement: Begun during the Great Depression (in earnest) by the likes of Pete Seeger, Woody Guthrie, et al. Born long before any boomer was a twinkle in Daddy's eye.
Socialism: Begun in earnest in the 1800s; followed on by the likes of Woodrow Wilson -- born in the 1800s.
The Peace Movement of the Sixties: Brought about by old members of various Communist movements from the NINETIEEN THIRTIES! Their operatives (I met several personally), were people more than eight to ten years older than we were.

When all this began, we were a bunch of dumb kids who fell for an idealistic line. It may interest you to know that many of us grew up. However... Count the number of actual Boomers in truly high political office. Isn't Pelosi over 60. (Sorry, Nancy the facelifts didn't work). What about Murtha? Kerry was on the very leading edge (technically, anyone born in 1945 or earlier isn't considered a Boomer.)

We really, truly didn't start thic cr*p, and most who are now perpetuating it are pre-Boomers. Yeah, I admit there are a few, but not as many as you think

So, can you all lighten up? Geeze, I get the creepy feeling that some of my fellow FReepers would cheerfully put the needle in my arm tomorrow just to rid the world of our "scourge."

< /rant>

Sounds like another episode of Jay Leno's "Jaywalking" features.

I think those are heavily edited. I have a feeling that when they run into people who actually can answer all their questions, they don't put those people on the air because people who know that the Vice President of the USA is Dick Cheney and that Francis Scott Key wrote the Star Spangled Banner aren't funny.

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