There’s been a lot written on the impending labor shortage in this country that’s expected as the Baby Boomers barrel towards retirement. I’ve even done my share of these stories.
But more and more I’m starting to think there is going to be a surplus of workers in the years ahead. Why? Because people can’t afford to retire.
The crummy U.S. savings rate, the death of pensions and the growth of 401(k)s, many of which are now in the toilet because of Wall Street’s stupidity, are all conspiring to create a class of workers heading for their golden years that won’t be able to afford retirement.
Already we’re seeing a growing number of the 65-plus crowd continuing to punch a clock. About 15.4 percent of people aged 65 and older were still in the labor force in 2006, a jump from 12.1 percent in 1996, according to the most recent Bureau of Labor Statistics’ most recent figures.
There are two scary story in major newspapers this morning related to this problem.
One in the New York Times about older Americans who are faced with the diminishing value of their 401(k)s and are terrified about what the future holds:
“There’s a terrified older population out there,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. “If you’re 45 and the market goes down, it bothers you, but it comes back. But if you’re retired or about to retire, you might have to sell your assets before they have a chance to recover. And people don’t have the luxury of being in bonds because they don’t yield enough for how long we live.”
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 a story in the Wall Street Journal on how retirees are being forced to take money out of their 401 (k)s to pay for living expenses because of the struggling economy:
With stocks falling, credit tightening and unemployment rising, small investors have been raiding their 401(k) accounts or slashing contributions to the popular retirement plans, according to the latest tallies of plan administrators. Others, eager to shield their portfolios from further damage, are reducing their exposure to stock mutual funds to near record lows.
The behavior — described by some market watchers as panicky in the past week — has led to worries that the retirement prospects are dimming further for Americans, most of whom no longer have private-sector pensions to rely on.
Recent 401(k) winnowing is coming in the form of “hardship withdrawals” — removing cash from the fund, with a 10% tax penalty, for exigencies such as job loss, the prospect of losing your home to foreclosure or a big medical expense.
It’s a sad state of affairs for the individuals that have worked all their lives to provide for their families and also keep this nation running.
This week, Congress is debating whether to bail out Wall Street’s elite who, by their own greed-inspired stupidity, have brought down the financial system in the United States.
Everyone saw the markets as the economy’s savor. The Bush Administration even considered pinning Social Security to the stock market during the heydays just a few years ago.
And businesses didn’t want the burden of pensions, opting instead to push their workers into the riskier 401 (k) options. But now it seems pretty clear — the traditional pension system wasn’t such a stupid idea after all.
Can we bring pensions back? Some of that $700 billion that Congress is considering sending to Wall Street might be better served shoring up a new national pension system, or infusing Social Security with some much needed funds. No?
September 23rd, 2008 at 4:44 pm
I’m not planning on retiring, in the traditional sense of the term. I hope, in time, to reduce my need for income by cutting back on my spending–paying off the house, staying out of consumer debt, and eventually launching the kids into adulthood. Then, I plan to cut back my hours and give more of my time to serving with my community of faith. I plan to keep working as long as this bag of bones can handle it. When I get past that stage, I hope my children will be willing to care for me as I cared for them (that is what they’ve been taught, counter to what most of the culture seems to throw at them). If not, I’ll make a very interesting homeless person.
September 23rd, 2008 at 5:01 pm
I think some of us have the luxury of loving what we do and have no problem working until we drop. As a writer, I’ll probably be writing on the way to my funeral. But there are so many people that have skills for jobs that aren’t made for a 65 year old body; or a health issue can derail them from holding any job. In these and so many other situations retirement should be an option. I’m sure there are a lot of greeters at Wal-Mart that wouldn’t mind getting off their feet.
On another note, I bet you would make an interesting homeless person HikingStick. See ya on the Bowery.
September 25th, 2008 at 2:40 am
Quite frankly, and this is coming from an ultra conservative Republican, If you have a pension or are fully vestd in a retirement plan, by all means RETIRE. You are in the way. There are young people who need your job. If you are a parent and you have raised your children, let them go to work and populate our depleted country. I would not discourage any one from perhaps volunteering. The truth be told, if you remain idle, you will do nothing but spend all your money. The 65 year mark should also be decreased. In an industrial job, 60 should be the absolute max for retirement. In a white collar environment, you have done it all at least three times by the time you are 60. If I sound as though I am against older people, I am not. I cherish the company of my elders. I am all of 47. I am still convinced people over 30 are full of shit. That included me.
I would also encourage any one with a retirement plan to seriously look into your plan. On the expensive advice of an exclusive and very well reguarded financial institution, let me reveal a millionaires secret. You could have 1 million dollars in a retirement account. The federal tax would be about 32% or 320 thousand dollars. If you use $1 of this money before you are 55, you are also penalized an additional 40%. Now you could and you should have an alternate retirement plan. You could have 50 thousand dollars in another retirement account. The tax would be closer to 16 %. The trick is, if you are over the magic 55, you can only be taxed on one retirement plan. And that is your choice. You would be a fool to file your 1 million dollar account as your primary retirement income. Many wealthy people have several retirement accounts. These other accounts can be taxed, however it is usually taxed at small percentages like one to three percent. The same rules and implications apply to people who have common retirement accounts like you and I and every one else who reads this. The government encourages you to save. They do not penalize you for being wealthy. nor do they penalize you for being poor. The inequities we seem to identify wealth with are not so much artificial, but they are really not complicated. You could assume I am a fool or an idiot. I encourage to look it up. It is that simple.
I do not support Obama to be President. However, I must say his simple revelation about tire pressure is absolutely true. If you have properly inflated tires on all four wheels, you do increase the milage by not making your engine work so hard. When was the last time you checked your tire pressure? I do often and always did. I am not happy with the current gas prices, however being somewhat familiar with cars, it isa guy thing, I feel I get as good milage on my 7 year old Voyager as I can get. The point here is sometimes we really do complicate things that are really simple. People in my labor union think I should be tarred and feathered for saying ‘GET Out, you are in my way’. Well they are. And when I did look at our retirement plan. it is true. Your payout for 25 years service is the same as 30years and your 35 year payout is less. Look closely at what is in your plan. You might be happy you did.
September 25th, 2008 at 4:08 pm
Hey Robert, the payout may be the same, but having had a father who was a career union tin-knocker (sheet metal worker), I can say this: the payout may be the same, but by dropping out those five years early the guys don’t get those five years of income at their current scale rate. Now, if the pension was paying more than scale, they might be interested, but that’s not real life. They want those extra years of income so they don’t have to start pinching pennies as early.
September 27th, 2008 at 3:58 pm
At the same time, why let young men with young children struggle with what he has to wait for while you are making a good living?