Retirement Turns Into a Rest Stop

[sgeeeee]

This article is peppered with data and facts about the evolution of retirement over the past few decades due to significant changes in pensions, medical benefits, etc. The actual facts and data is mingled with stories of retirees that you won't always feel sorry for, but the data was interesting:

http://www.nytimes.com/2005/02/09/business/09retire.html?th

Retirement Turns Into a Rest Stop as Benefits Dwindle

. . .Not only are many discovering that they cannot afford to retire, they are also finding themselves in a labor market in which companies facing tough competition seem intent on controlling costs, partly by ridding themselves of higher-earning older workers.

. . .The steepest turnaround in labor participation has occurred among older men. The percentage of men 55 to 64 years old in the work force fell steadily from 87 percent in 1950 to under 65 percent in 1994. Then it began inching back up, reaching 69 percent last year, according to the Labor Department. Among men 65 and older, the participation rate rose from 15 percent in 1994 to 19 percent last year.

For older women, who entered the labor force at increasing rates through the 1950's and 1960's, the change has been less pronounced. Nevertheless, the rate of participation for women over 55, after declining from around 26 percent in the late 1960's to nearly 21 percent in the mid-1980's, has rebounded over the last two decades, to 31 percent.

. . .As recently as 1979, the Center for Retirement Research at Boston College found more than 80 percent of the workers covered by a company retirement plan had a defined-benefit pension. By 2001, the percentage had dropped to a little over 40 percent.

. . .In 1988, two-thirds of all large employers offered health benefits to retirees; last year only about one-third did. And employers who offer coverage are forcing workers to shoulder more of the cost. In 2004, 79 percent of them increased their retirees' premiums. A survey by Watson Wyatt, a corporate-benefits consulting firm, found that the absence of company-financed retiree health insurance increased the average retirement age by two years for women and 1.5 years for men.

. . .For Americans heading into retirement, the contrast to the previous generation is stark. The typical household headed by a 47- to 64-year-old is poorer today, in constant dollars, than a similar household was in 1983. The main reason is the disappearance of the traditional pension, according to Edward N. Wolff, a New York University economist who analyzed Federal Reserve wealth data."

One of the personal stories was more compelling to me than the typical one you read. This guy made some investment mistakes, but largely got caught by a company that turned on him.

. . .Made to carry more of the burden of their retirement, many retirees say they feel that a social compact between workers and employers - a set of expectations established over the second half of the 20th century - is being dismantled.
. . .Joe Janson, for example, retired three years ago, when he was 55, from an $83,000-a-year engineering job at Lucent to a $35,000 pension. But now he is looking for work again to pay for his family's health insurance, which Lucent cut last year.
. . ."We were making it before they took medical away," Mr. Janson said. "It's kind of like the company pulling the rug out from under me now."

 

[John Galt]

I didn't read the article, and my heart isn't really made of stone BTW.
My guess is that the entire text contains a lot of whining
(Oh, poor me!"). I would just be annoyed by that.

JG

 

[peggy]

See the thread on this article in "Costs of Retirement Life."

 

[laurence]

It's true that some companies have not lived up to promises made earlier, but it's never a wise idea to rely on others. I worry about the dependence mentality cultivated over the last 50+ years crashing into the harsh reality of today. BTW, John Galt, we'll have to chat sometime about your name. I got my BA in Economics and the professor who made the most sense to me turned me on to Ayn Rand's works. After I read Atlas shrugged (who is John Galt?) and the Fountainhead, I think I got the message, so I stopped there.

 

[Martha]

My aren't we hard hearted sorts. Culture of dependence? Whining? I see nothing wrong with expecting our society to have a safety net for retirees through social security and medicare. I see nothing wrong with a health care safety net for all. I do not think this creates a culture of dependence. Instead, I think it would reflect a society that cares about its members. We don't need to have a harsh reality. We live in a rich society. We can be a bit more generous.

I have seen far too many people lose it all. Get a serious illness and lose your job. Even if you can afford Cobra, that expires. Not only can people lose all their assets, they can die in this country because they can't afford medical care.

My father in law was a sailor for Bethelem steel and retired with a half decent pension and retiree health benefits. For years this was the expectation and the given. Finally the company couldn't afford it any more and for this reason and others, ended up in bankruptcy. No more health coverage. Thank goodness for social security and medicare.

This isn't to say I think we should bail out the early retiree. If you go early, you take the risk. However, there will be less of these types of stories if we only figured out a health care system for this country that wasn't tied to the vagaries of employment.

Martha

 

[peggy]

Martha_M said:

Culture of dependence? Whining? I see nothing wrong with expecting our society to have a safety net for retirees through social security and medicare. I see nothing wrong with a health care safety net for all. I do not think this creates a culture of dependence. Instead, I think it would reflect a society that cares about its members. We don't need to have a harsh reality. We live in a rich society. We can be a bit more generous.

Your very words indicate a culture of dependency, specifically "expecting society to have a safety net." Because that safety net is there--or perhaps more accurately, because people *expect* that safety net to be there--many people depend on that expectation and neglect to plan for their own retirement, their own health care, their own savings. Why should they, if "society" is going to provide it for them?

Not only can people lose all their assets, they can die in this country because they can't afford medical care.

Anyone who needs medical care can get treated at hospitals throughout the country. At least one hospital in my city is required to provide indigent care.

My father in law was a sailor for Bethelem steel and retired with a half decent pension and retiree health benefits. For years this was the expectation and the given. Finally the company couldn't afford it any more and for this reason and others, ended up in bankruptcy. No more health coverage. Thank goodness for social security and medicare.

Again, because of the *expectation*, your FIL did not provide for contingencies. If he had not expected his company to provide for him, might he have planned differently?

I'm not saying that it's absolutely wrong to have a health care safety net; my opinion on that subject isn't really germaine to the point I'm making in this post.

That point is, it appears to me that people are neglecting to plan for contingencies because they expect society to provide for them--and nothing is a guarantee.

 

[Martha]

Peggy, I am saying that everyone cannot plan for all contingencies. Many will be successful. Some won't through their own fault. Some won't through no fault of their own. Why did we end up with social security in the first place?

On the hospital care issue, all that is required is emergency care. If you have cancer, maybe they will give you a pain killer. They are not obligated to give you chemotherapy. This is a particular pet peeve of mine that many seem to believe that health care truly is available for everyone in this country when it is not.

Martha

(CT, Mikey, Bob, where are you when I need you?)

 

[Martha]

Got interrupted by work (work? I work for a living?) during my last post.

I also wanted to say that I kinow a number of women who are single parents, making $15,000 to $30,000 per year. Some get help from a former spouse, some do not. Some have health insurance through work, some do not, especially those who work for small employers. Many put aside money in 401(k)s at work if available. It likely doesn't amount to much. They each are one step away from disaster if something happened to them---car accident, critical illness, a child's illnes. These are strong, independent women who are doing their d**n well best to provide for their families. Symbols of dependency for expecting social security or medicare? I think not.

How do they plan for all contingencies? They have enough to try to plan for as it is.

My husband used to rent to a number of tenants that were developmentally disabled or mentally ill and collected SSI. They were dependent on our society. We give them a meager amount to live on and then avoid them like the plague if they happen to be hanging around downtown or riding the same bus that we ride. So what if they are dependant. I never want to be in their shoes. Some might say it is their families who should care for them. With what resources? Who will pay for their medical care?

I have watched many people over the years file bankruptcy. Some were the poorest planners I have ever seen with no concept of what it took to pay back their debt. But many were people that worked hard, didn't expect anyone to provide for them, didn't waste their money, and had something devastating happen, from divorce to illness, that pushed them into bankruptcy.

Martha

 

[guest]

I belive that health care should be treated the same as transportation, education, and defense. It is something needed by society, and there should be basic provision
for that. Having one's healthcare dependent on a job makes no sense.

 

[John Galt]

Martha, in the context of the "real world", I agree with
your entire last post. Maybe I am a "Compassionate Conservative"? Obviously some provision must be made
for those who (through no fault of their own) meet
with disaster. Usually, the trouble starts when someone
has to decide how far to go in taking from some
citizens to help others.

JG

 

[Martha]

I agree with Guest.

John, I knew you were a softy at heart.

 

[haha]

Peggy, I am saying that everyone cannot plan for all contingencies. Many will be successful.  Some won't through their own fault.  Some won't through no fault of their own.  Why did we end up with social security in the first place?

On the hospital care issue, all that is required is emergency care.  If you have cancer, maybe they will give you a pain killer.  They are not obligated to give you chemotherapy.  This is a particular pet peeve of mine that many seem to believe that health care truly is available for everyone in this country when it is not.  

Martha

(CT, Mikey, Bob, where are you when I need you?)

Martha, I am here. You have stated the case so well that there really isn't any more to add. But since I like the topic, I'll try.  

If humans were supposed to be solitary and totally self reliant, we would be tigers or boa constrictors. We are humans- one of the things we can do better than many other species is rely on one another in complex interdependencies.

While we do want to make our risk sharing systems difficult to abuse, I think it is very inefficient for everyone to have to provide everything on his or her own. If a person is a good ICU nurse and a good mother for her children, must she also be a financial expert?
I think one can only do so many things, and it is better for society and for the individuals in the society to be able to participate in risk sharing arrangements.

In the case of your FIL, he was a seaman. There was no reason for him to expect that he would also have to be a financier. Bethlehem reneged on their deal.

Another frequently ignored cost of our hyper-individualistic system is that is produces stress which damages health. Plenty of epidemiological work shows that business downturns and unemployment are closely associated with sickness.

A bare bones but reliable health insurance system would go a long way. Unfortunately, I don't expect to see it anytime soon.  

Mikey

 

[peggy]

I don't have a problem helping those who, through no fault of their own, can't help themselves. But in the larger picture, we should all strive to be as self-reliant as possible.

As far as why we ended up with Social Security in the first place, as I recall from my history studies, it was a measure enacted during the Great Depression to lure older workers out of the work force and make room for younger (less costly) workers. Even FDR himself said it should be phased out over time.

 

[Martha]

Mikey, you said it perfectly. Thanks.

 

[brewer12345]

Whether you believe in all this "culture of dependence" stuff or not, the thing I think is getting tossed out the window with the SS debate are the implications for elderly poverty if there are significant cuts to benefits. The majority of elderly retirees are VERY dependent on SS for survival, with SS making up 75% or better of their income. If we start slashing benefits in an indiscriminate manner, it is the elderly who will bear the brunt of it. The average SS check doesn't provide for a princely lifestyle; it is a survival income, that's it.

Don't get me wrong, I do think we should do a little tuning of SS. Benefits very clearly should be means-tested. The eligibility age for full benefits should be pushed out. I'd suggest bumping SS taxes, but really I know that it would just go into the gummint black hole and be used for things aside from SS.

Personaly, I would not benefit from any of these potential changes, at least not financially. However, I'd much rather cough up a few bucks than see a large increase in elderly poverty and human misery.

 

[laurence]

You all make very good points, these are complex issues. My frustration is I feel there is a reality gap between what get's sold to us (feed and clothe the homeless elderly and provide basic medical care for all) which sounds good, and what happens when the politicians are through (social security checks being collected by millionairs who are still working and pescription drug benefits for viagra). My heart is with the retired steel worker who had his pension taken away because the Ken Lay type running his company ran it into the ground throwing playboy parties. I just don't neccesarily agree with the solutions being proposed by politicians. A lot of bait and switch going on, including with this new proposal on SS. Ugh.

 

[Bob_Smith]

(CT, Mikey, Bob, where are you when I need you?)

Martha, I agree wholeheartedly with your initial post, and with Mikey's. I'd much rather live in your world than the cold society Peggy is promoting. There are many reasons for this, much of it is covered in your post, and in Mikey's, but high on the list is my preference to be around people who don't think like Peggy.

Furthermore, Social Security, Medicare, and pensions aren't welfare as Peggy implies with her "culture of dependency" nonsense. People who receive those benefits paid into those systems. Now their corporations and their government are trying to weasel out of commitments these folks relied upon in their planning. They're being shafted. Demonizing them is ridiculous.

Regarding Peggy's "culture of dependency": For 30 years I worked on the front lines with people who were down and out. I knew them well - and I knew their families. There is no "culture of dependency". That whole notion is a myth huckstered by armchair conservatives like Peggy who are merely spouting what they've heard someone else say, but who have not the slightest clue about the real world. To them it is an idea that meshes well with their self-centered view of the world and enables them to feel superior. But it's false. They have it all wrong. Any dependency issues are incidental and largely inconsequential in the grand scheme of things. I don't have enough space here to even begin to touch upon the big picture, but I'm tired of hearing about "dependency" from a group, usually made up of wealthy people with easy lives, who reinforce each other's sloppy understandings of reality.

 

[laurence]

Whoa, touched a nerve there! I agree that the weaseling out of pensions is horrible, as employees we agree to terms of employment, and the pension is part of our compensation. Employers have no problem firing employees who steal from them, and usually press charges, too. Employees should have the same rights. But I can't agree on SS and Medicare on the grounds you cite. Most people get every penny they paid into SS within 5 years, and what we pay into Medicare probably won't begin to cover what we cost it in our elderly years. I'm not opposed to the idea of a safety net, however. We all benefit from a more stable society and better piece of mind knowing if things get bad there is that last life line. I just have a problem with millionairs collecting SS and handling erictile dysfunction issues on my tax dime! With your experience with those who were down and out, perhaps you could talk about what led them to hard times, I for one would love to have the myths dispelled.

 

[Zipper]

You would make a great Canadian Martha.

As for peggy? Keep her state side. Bad things can and do happen to good people.

A society is judged on how it treats it's most vulnerable.

 

[farmerEd]

>>That whole notion is a myth huckstered by armchair conservatives like Peggy who are merely spouting what they've heard someone else say, but who have not the slightest clue about the real world.

Would that "someone" be Rush Oxycontin Limbaugh by any chance?

 

[sgeeeee]

Glad to see you got the support you deserved for your posts, Martha. Bob Smith and mikey can be relied on to do the right thing.

It's strange to me how hard hearted some people are about investing and financial matters. If someone bought a new car and the doors fell off and the engine fell out on the drive home, most people would agree the consumer has a right to expect to be compensated for the poor design and construction. The dealer and manufacturer that wouldn't make good on the purchase would be viewed as criminals. We can't expect every consumer to have detailed mecahnical engineering credentials and be able to test every bolt on the vehicle before they buy.

But let the same consumer buy a retirement investment plan from an employer or a broker, only to find out they lost all their money and we hear this "consumer beware" nonsense. While I came to accept that I had to learn about investments and retirement and spent the time to do so, I can't say that I enjoy having to spend so much time to keep ahead of the financial con artists out there. And I don't see how forcing every individual to become an investment expert is good for the society. Why don't we think the investor deserves the same protections and honesty that the consumer deserves? It seem damn inefficient if you ask me.

And one more thing . . . is it just my imagination or is Bob Smith getting more assertive now that he's retired. Good for you, Bob. I have always enjoyed your posts and like them even more with a little bite in them.

 

[peggy]

Pretty impressive how questioning a few assumptions becomes "promoting a society."

Also interesting how none of the posts attacking me have addressed my points--which I will summarize:

1. No one has as much at stake in your finances as you do, and therefore you need to take responsibility for them. (NOTE: generic "you"; everyone on this forum already agrees with this to some degree.)

and

2. The existence of social safety programs tends to discourage that kind of planning.

And to extend salaryguru's analogy a bit--no, the buyer of the car should not be blamed for buying a mechanically defective vehicle. He should, however, be blamed if he doesn't maintain the vehicle (regular oil changes, etc.) and *then* complaining that he got sold a lemon.

Why does applying the same reasoning to financial matters result in such venomous responses?

 

[Cal]

1.  No one has as much at stake in your finances as you do, and therefore you need to take responsibility for them.  (NOTE:  generic "you"; everyone on this forum already agrees with this to some degree.)

When I'm flying on an airplane, I have as much at stake as everyone else on board. Should I have to know how to fly the plane? Nobody has as much interest in maintaining my car as I do - it was my hard earned money that bought it - should I have to repair it myself? Am I being irresponsible because I don't know how to fly a plane or change the transmission fluid of my car?

2.  The existence of social safety programs tends to discourage that kind of planning.

I think everyone on this board probably represents the exact opposite. I have been given the same "promise" of social security as everyone else. Am I relying on it? Am I failing to save for my future? No.

And to extend salaryguru's analogy a bit--no, the buyer of the car should not be blamed for buying a mechanically defective vehicle.  He should, however, be blamed if he doesn't maintain the vehicle (regular oil changes, etc.) and *then* complaining that he got sold a lemon.

My father, who is nearing retirement, went to a "professional" to get advice about his IRA because he knows he is not financial savvy. The wonderful broker put him into techs just weeks before the crash. The "professional" did not take my father's age nor risk tolerance into account when allocating the money. As a result, my father's retirement money was more than halved. He saved for years but now he is behind the eight ball. I suppose by your reasoning it is his fault because he didn't understand risks or allocations and relied on a "professional" to guide him.

Why does applying the same reasoning to financial matters result in such venomous responses?

I suppose I'm envious because I don't live in a "perfect" world where bad things only happen to "bad" people who are "too lazy" or "too ignorant" to save for their financial future. I have had family members who have had their savings wiped out by medical conditions. There is the example of my father above. What is the alternative you are suggesting? What do you propose for people, regardless of the reason, cannot support themselves in retirement?

 

[jarrob]

This is an interesting thread as it is about a subject that has no real answer.

Maybe we need to step back and look at what we, as a society, expect.

Here is my input:

Medical care - this should be 100% freely available to anyone who needs it. If we cannot help the suffering of our fellow man then we do not deserve to be part of society.

State pensions/SS should not be available to retirees UNLESS they cannot work due to illness or disability. IMHO I can't see why a person expects that society should look after them when they decide to stop working. If you want to stop working then plan and provide for it - don't expect others to pay for it. This is exactly what happenned in the olden days(!) - pensions/SS was paid to people who were unable to work due to disabilty (i.e. they were physically worn out (or dead) by the time the got to 65!).

 

[Martha]

Also interesting how none of the posts attacking me have addressed my points--which I will summarize:

1. No one has as much at stake in your finances as you do, and therefore you need to take responsibility for them. (NOTE: generic "you"; everyone on this forum already agrees with this to some degree.)

When I review the posts, it looks like nearly everyone who disagreed with you addressed this issue. See Mikey, Bob, Salaryguru and Cal.

2. The existence of social safety programs tends to discourage that kind of planning.

How do you know this is the case? Bob who has experience with the "down and out" says his experience is to the contrary. My experience with both people who are very successful financially and those who are not is that most people do the best they can with the resouces they have. By way of example, will lack of health insurance for us all make us healthier because we will then be more careful about how we take care of ourselves? Are we healthier than the Canadians? I don't think so. And after all, I know plenty of people who take good care of themselves who had heart attacks or got cancer.

Why does applying the same reasoning to financial matters result in such venomous responses?

Because it is more than about just money.