If you look at people 46 to 64, it used to be that that was the prime of your life, not only in terms of contentment and satisfaction, but also in income. The boomers will be the first generation to do worse in their old age than their parents or grandparents. —Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research.
From the age of 23, when she was the first female steelworker at Butler Manufacturing, Diana Arends labored to carve out a solid middle-class existence.
Elbow grease and grit moved her steadily up a union hierarchy until, as a tool-and-die maker at age 59, she sat atop the union pay scale at Ball Corp.’s beverage-can plant in Kansas City, Mo.
Then came the crash of ’08, the closing of the plant and the start of hard times that look to define the remaining decades of her life — and tens of millions of baby boomers like her.
She’s worked just one year of the five since trouble gut-punched a generation just as a decent retirement seemed within reach. Her 401(k), the tax-sheltered account she’d been stocking all those years, was suddenly cut in half by the stock market dive, and it hasn’t rebounded to where it should. By age 62, she was forced to tap into Social Security early. That meant that forevermore, her monthly check would be $600 lighter.
Now 64, she still looks for work that puts her skills to use and strikes out, concluding that bosses have little interest in a leftover from a manufacturing age. She lives with her daughter and granddaughter in a Lee’s Summit, Mo., home that no longer has cable TV or a landline phone, that chills in the winter and toasts in August.
“I expected to be able to retire, take a camping trip now and then,” Arends said. “I didn’t expect to still be job-hunting to supplement my income.”
A generation once warned not to trust anyone over 30, and that now has kids with kids, wonders if it can believe in its own old age. An implied bargain that promised security after decades in the workaday world looks, if not busted, mighty rickety.
Look now, five years after the fall, and the landscape looks uneasy and unfamiliar.
“There’s a whole new world out there,” said Ralph Monaco, a Kansas City baby boomer.
Too many nest eggs got dashed in the 2008 cratering of stocks and home equity. Sure, things have bounced back … slowly. But half a decade of what should have marked prime, late-career earning years — from both investments and wages — all but evaporated.
Baby boomers were more likely to hang onto their jobs through the Great Recession than younger workers. Still, for those older workers who got laid off, the pink slips were especially devastating — forcing early and painful dips into retirement funds.
The still-employed also got whacked. Many saw company contributions to pensions, or matches to retirement accounts, evaporate. Wages stagnated or shrunk — at just the time in their careers that folks might expect to finally make top dollar.
And the lousy job market for young workers meant Junior’s inability to rise above barista extended his reliance on Mom and Dad deeper into his 20s — and their dotage.
“If you look at people 46 to 64, it used to be that that was the prime of your life, not only in terms of contentment and satisfaction, but also in income,” said Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research.
But not this generation.
“The boomers,” she said, “will be the first generation to do worse in their old age than their parents or grandparents.”
Even before the crash, signs crept up that retirement years might not be so golden, or even reachable. Pensions increasingly lacked the full funding needed to guarantee the promised monthly checks. Although the federal government promises to backstop many of those pension funds, you didn’t need to be Chicken Little to imagine more collapsing accounts than Uncle Sam could field.
Meanwhile, fewer employers felt a need to tempt workers with the promise of a pension. And the Pepsi Generation that never tasted the bitterness of the Great Depression did relatively little to save for the rainy days of retirement.
In the still go-go days of 2007, the Center for Retirement Research at Boston College calculated that 44 percent of Americans nearing retirement were at risk of falling significantly short of their current lifestyles if they tried retiring at age 65.
Then in 2008, ordinary Americans began hearing about mortgage derivatives and other financial gymnastics. Suddenly, their home equity morphed into mortgage debt, their boss stopped pension contributions and 401(k) matches, or maybe their services weren’t even needed anymore.
In an eye blink, a generation’s retirement prospects turned from sketchy to crummy. By 2010, the number at risk of being unable to retire at age 65 had jerked up to 53 percent.
“The boomers are going into retirement in terrible shape,” said David Cay Johnston, author of “The Fine Print: How Big Companies use ‘Plain English’ to Rob You Blind.”
He’s studied pensions and America’s retirement systems for decades and concluded the Great Recession not only buckled boomers’ knees, it widened the chasm between the country’s haves and have-nots.
The laid-off and desperate found themselves forced to dip into stock-based savings when their values were particularly low. They were forced to cash out at the worst possible time. Those buying up those bargains — the wealthy — were the only people who had cash to spare. And it’s the rich who have profited from the subsequent rebound.
Meanwhile, a transforming economy of mergers and new-found efficiencies meant more workers got tossed to the side. That can prove daunting enough at any point in a career, but it’s especially tough for older workers.
“At this point in your life, you’re beyond the mountain climbing, beyond the time to make a name for yourself,” said Janice Lambert of Overland Park, Kan.
She’s 59 and laid off. Her employer merged with another company, was sold again and sold a third time — at which point it no longer had room for her.
She talks about feeling like a puppet, with distant financial forces tugging the strings that toss her future this way and that. To her, it feels like the puppet masters responsible for the 2008 financial crisis only got richer.
“It wasn’t supposed to be this way,” she said.
If she finds a decent job, she’ll likely stay in the workforce untold extra years to make up for lost time.
Baby boomers — a diverse demographic of nearly 80 million born between roughly 1946 and 1962 — peer into a time after work and see, well, more work. That’s assuming the workplace has room for folks who once thought of technology as a slide rule (look it up, kids).
The Bureau of Labor Statistics predicts that between 2008 and 2018, the number of middle-aged folks in the American workforce will jump by 33 percent. The number of workers 65 and older is expected to grow by almost 80 percent.
Making it all sting a little more is that, as a generation, they’ve not been a particularly frugal bunch.
Relative to their salaries and their lives filled with SUVs, 200-channel TV, beach vacations, boats and Botox, they’ve saved very little. On average, baby boomers waited until they reached age 35 before they even started setting aside money for retirement. By one estimate, even if they transform all their savings into annuities and max out reverse home mortgages, half the generation will see a marked drop in standard of living during retirement.
“We’ve lived beyond our means. We’ve used the equity in our homes for the last decade as cash machines,” said Daryl Eckman, a 59-year-old certified financial planner in Prairie Village, Kan. “We feel we have to live a certain way. … We feel we have to drive a certain car, put up appearances.”
If a friend his age has money, chances are Eckman is managing it. Their ledger, he said, usually reflects that even those with six-figure incomes live on the edge.
“The floor drops out on them very quickly,” he said. “They look to the government. They look to whatever the system will allow.”
Monaco is a 57-year-old Kansas City lawyer who feels he has little margin for error in his finances. He has diabetes and high blood pressure. He’s raised two daughters, and his retirement account won’t allow him to stop working anytime soon. He’ll keep working, he figures, as long as he’s able. If he’s able.
“I don’t see an opportunity for me to ever get out of the workforce,” Monaco said.
That necessity is, he said, partly the result of his own choices. He indulged his two daughters in childhood and insisted on paying for their educations to dodge student debt. He’s lived more comfortably, and less frugally, than his parents’ generation — a group sobered by the hard lessons of the Great Depression.
“I’ve got to pay for keeping up with the Joneses,” Monaco said. “We all seem to have to keep a profile, which is unnatural and unreasonable.”
If you’re not among the gilded 1 percent, it seems, there’s little reason to quit your job just because you’ve celebrated a 65th or 67th or 70th birthday.
Most Americans now calculate they’ll need a paycheck — either part-time or full-time — beyond the time when they can expect full Social Security retirement. (Depending on the year they were born, that falls between 65 and 10 months and 67.) A third will work to stay active. The rest will chase a buck out of necessity.
The good news is we’re living longer. The bad news is we can’t afford it.
This is where history reminds us that Social Security’s original retirement age was set when barely half of those who reached adulthood could expect to live to 65. Now, more than three-fourths cross that line. In 1950, a working man lived an average of seven years after retiring. A half-century later, a similar guy could expect twice as many years of elderly leisure.
In 1995, the average expected retirement age was 60. By 2011, it had been pushed back to 67. But life expectancy isn’t growing that fast. The difference in life expectancy between 1995 and 2011 is less than three years, not the full seven years that retirement got put off.
A Senate study in 2012 identified a $6.6 trillion retirement deficit — the difference between what people should have saved to maintain their lifestyles and the far smaller amount they actually set aside.
The fault is not entirely their own. They’ve seen the stock market cave in with some regularity — 1987, 2001, 2008, each time more painfully close to baby boomer retirement with less time to make up the losses. And each time making work harder to come by for the gray-haired workers.
“Our parents had mostly paid off their homes, had some pension or defined benefit. And Medicare covered most of their health care costs. None of those are true today,” said Dean Baker, the co-director of the Center for Economic and Policy Research.
“People still have pensions, but they’re fewer and dwindling rapidly,” he said. “Health care expenses … have exploded.”
His think-tank recently calculated the median wealth — savings, home equity, the works — of people between the ages of 55 and 64 at $170,000. That was about the same as the median home value.
“They literally have nothing left beyond the value of their homes. That means the only thing they have to support them is Social Security,” Baker said. “You’d like to think that people who spent their lives working would have some comfort in retirement.
“That’s going to be a questionable proposition.”
In that way, the Great Recession undercut so many boomers’ sense that they’d be rewarded for long years of work with a decade or more of secure retirement.
“A lot of baby boomers like me thought … if we worked hard, got our homes paid off, have a little nest egg, we’d probably be doing more travel and enjoying it and spending more time doing community service,” said Tim Pickell, a 60-year-old attorney in Prairie Village.
Like a lot of people, he thought wrong. Much of a family inheritance was wiped out — the stock market tumble took a chunk, so did a need to make up for a slowed-down income stream from his law practice. That set off serious recalculations.
“The reality is,” Pickell said, “I have a lot of hard work to do.”
Arends, the once-successful steelworker, dreads as much as anything the anxiety of endlessly pinching pennies.
Her pension and badly depleted retirement savings must keep a household of three afloat. Indefinitely. She’d like to go to the movies, but rents videos from Redbox instead. She’d like to eat out, but scours a discount grocery for sales. She’d like to spoil her granddaughter, but rarely can.
“I worked hard. I’d like to work more,” she said. “But this is where I am.”
©2013 The Kansas City Star (Kansas City, Mo.)
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