Tuesday, September 23, 2008

Reconsidering Retirement

As this article in today's NY Times points out, people in their forties can't be thrilled with the volatility of the market and the troubled financial world, but at least they have the time to wait for a recovery. People in the sixties and seventies don't have that luxury.

Older Americans with investments are among the hardest hit by the turmoil in the financial markets and have the least opportunity to recover.

As companies have switched from fixed pensions to 401(k) accounts, retirees risk losing big chunks of their wealth and income in a single day’s trading, as many have in the last month....

Today’s retirees have less money in savings, longer life expectancies and greater exposure to market risk than any retirees since World War II. Even before the last week of turmoil, 39 percent of retirees said they expected to outlive their savings, up from 29 percent in 2007, according to a survey by the Employee Benefit Research Institute, an industry-sponsored group in Washington.

“This really highlights the new world of retirement,” said Richard Johnson, a principal research associate at the Urban Institute in Washington. “It’s a much riskier world for retirees, because people don’t have defined-benefit plans. They have pots of money and they have to worry about making it last.”

And things are even worse for those who have to rely solely on Social Security because some of the other factors in the economic meltdown, including dramatically higher energy and food costs, means they have to stretch those few dollars even further. Even if they own their homes, many have taken part in the refinancing boom of the last ten years just to make ends meet so that their equity has declined dramatically just as the housing sector bubble has burst. Until local assessments catch up with the lower valuations, many can't pay the property taxes and face foreclosure for a different reason than those who purchased homes they now can't afford.

And for those of us on the cusp, not yet retired but nearing that day, "that day" has been pushed further into the future:

Surveys by AARP, the Transamerica Center for Retirement Studies and the Employee Benefit Research Institute have found that more workers nearing retirement age are putting off their plans to retire, curtailing contributions to their 401(k) accounts and borrowing from the accounts to pay for living expenses, including credit card and mortgage debt.

Getting old has never been easy in this culture, but now it's become much harder. Hopefully any deal that Congress makes with the robber barons keeps that in mind.

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Anonymous Anonymous said...

This is a painful personal issue. I wanted to retire to pursue activities for which I have no time while still working. Retirement, however,cannot take place in a volatile stock market.

Most of the country has given up on budgetary retirement. Even the government, that had a retirement after about 30+ years with about 70% of the last pay, has switched to a 401k and Sep. These budgetary retirements provide comfortable and secure life after work. Now they are mostly gone.

On the constant march backward we are left old and poor and the rich richer.

It will not stop now with the collapse Wall Street.

9:32 AM  
Blogger Diane said...

You and me both, lakelobos. I had hoped to retire at age 65 (when Medicare would cover me so I didn't have to pay $1100 a month for health insurance) because I thought more 401k would work until social security kicked in a year later.

Well, my 401k is now a 101k, and my IRAs are nearly worthless.

Right now, I can't envision a scenario where I can retire at any time, so the thought of the assholes who have caused this crisis and who are walking away with millions in bonuses and golden parachutes really challenges my pacifist beliefs.

10:20 AM  
Blogger Woody (Tokin Librul/Rogue Scholar/ Helluvafella!) said...

And the Govt--both parties--have installed ways into their codes and practices--ways of measuring shit-- which ensure that SS COLA triggers never quite get fired, and SS payments never seem to increase, despite the inroads in the payments made by (controllable) price inflation in the 'marketplace.'

Funny how dat works, innit?

6:03 PM  
Anonymous francis said...

The first baby boomers are approaching age 65, but new research suggests an increasing number are putting off retirement, because they simply can't afford it, according to the Retirement Confidence Survey, conducted by the Employee Benefit Research Institute.The percentage of workers very confident about having enough money for a comfortable retirement decreased sharply, from 27 percent in 2007 to 18 percent in 2008, the biggest one-year drop in the 18-year history of the survey.Retiree confidence in having a financially secure retirement also decreased, from 41 percent to 29 percent, a drop of 12 percentage points.Decreases in confidence occurred across all age groups and income levels but was particularly acute among younger workers and those with lower income.
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