Let’s say you
retired from your job some time over the past ten years or so and
when you did you had about as much as, or maybe a little less than,
what Governor Palin spent on her campaign outfit in your 401k-retirement
account. First thing you did was roll it into an IRA. Right now
you take a stiff drink before opening your monthly statement because
you know your nest egg will have shrunk appreciably and if it keeps
up at this rate you won’t be able to replace your 501s when they
start to fall apart. A lot has been written and said about the pre-retirement
baby boomers and their incredibly shrinking 401s but little about
the pre-boomers who once thought they would move comfortably into
their sunset years, well placed to replace their hearing aids and
glasses and still have a little to spend on vacation. For many of
them the situation is looking increasingly grim.
little over 12 percent of the country’s population is 65 and over;
58 percent of them are women. Of course, many of them don’t have
concerns about retirement accounts. Some are well to do without
them but a much larger group of retired workers are solely dependent
on Social Security and Medicare to survive.
not to say that the position of those born after 1946 isn’t precarious.
I got an email from a distressed boomer the other day saying she
lost $10,000 in September. That same day, at a union hall, a steelworker
retiree in Ohio told BBC-TV he had lost 37 percent of his retirement money
over the same month.
and financial experts now predict that retirees and older workers
who rely on financial investments for retirement income may suffer
more than any portion of the American population in the coming years,”
Rep. George Miller (D-Ca.) told a recent Congressional hearing.
“Unlike Wall Street executives, American families don't have a golden
parachute to fall back on. It's clear that their retirement security
may be one of the greatest casualties of this financial crisis.
The current financial and housing crises are stripping wealth from
American families at a record rate.”
testifying at an October 7th hearing before House Education and
Labor Committee, which Miller heads, said U.S.
workers have lost as much as $2 trillion in retirement savings over
the past year.
the last few weeks, we’ve been confronted with older worker and
retirees’ lives being turned upside down; their panic tops off an
already existing state of chronic anxiety about retirement futures,”
Teresa Ghilarducci, professor of economic policy analysis at The
New School for Social Research, told the hearing.
home mortgage crisis is making things worse. One of the reasons
working people jumped into the housing market so eagerly during
the “bubble” was that home ownership was touted as a more profitable
way of saving for the future than putting your money in the bank.
For a while it seemed to be true. That is, until the illusion was
shattered and it all fell apart.
recent study, “The Impact of the Housing Crash on Family Wealth,”
analyzed the finances of families headed by people between the ages
of 45 and 54 in 2004 and projected the wealth of families headed
by people who will be in this age group in 2009 and found that even
if real house prices remain what they are today most of these families
will have little or no housing wealth in 2009. “This extraordinary
destruction of wealth will have tremendous implications for millions
of families as they enter retirement,” said report co-author Dean
Baker. “Coupled with a very low personal savings rate, this means
that many people will only have Social Security and Medicare to
rely on in their retirement.”
Miller cited a recent poll that revealed 63 percent of the people
in the country are worried that they will not have enough savings
for their retirement. “Tragically, they may very well be right.
Due to the collapse of the housing market and the financial crisis,
trillions of dollars that Americans were counting on has been lost,”
said Miller. “Americans were counting on much of this wealth for
their retirement. Now it is gone - as is their ability to adequately
fund their retirement.”
for retirees to hang on to what they have salted away from their
earnings or invested in their homes over the years.
to say, meaningful action to arrest the wave of massive home foreclosures
and ensure most people can remain in their homes would help greatly
to alleviate the effects of the growing retirement funding crisis.
House prices can be expect to continue to decline for some time,
however, and the guarantee of a place to live would offset some
of the precariousness brought on by the steady undermining of retirement
in mind the retirement fund checks those who have left the labor
market receive each month are not entitlements. These are from 401k
plans they were assured would leave them in a better position on
leaving the workforce than the traditional pension plans employers
have jettisoned with abandon over recent years.
current financial crisis has certainly highlighted the fact that
401(k) participants - whose 401(k) account represent their sole
retirement savings - bear all the investment risk,” said Jerry Bramlett,
CEO of BenefitStreet, Inc., an independent retirement plan administration
firm. “The pain is particularly acute for those participants closer
to retirement whose retirement income expectations have been significantly
impaired possibly resulting in the need to postpone retirement.”
newspapers and the airwaves are full of advice to people caught
up in the retirement security crisis. It’s pretty much what financial
advisers and benefit managers are telling folks all over the country:
don’t sell, don’t leave the market, if you move your money to a
place that may be more secure - but with lower rates of return -
you will lock yourselves into the lower rate. How long it will take
until the economy heals range anywhere from two to 10 years. That’s
when it bottoms out and starts to improve. As one forward-looking
retiree recently pointed out, the stock market recovered fully 25
years after the 1929 crash that heralded the Great Depression. The
Dow Jones average didn’t return to pre-1929 levels until 1954. The
reaction of some of today’s retirees is quite understandable: I
should live so long.
the special media reports on retirement security and the advice
being offered up for coping with the crisis there is one reoccurring
theme: a lot of people have decided they cannot afford to retire
and thus plan to – or wish to – remain on the job into their 70s.
The problem is employers are more apt to lay off older workers before
they retire because they are the most costly. But the reports seldom
indicate fully why this is so. It is not just because they have
been around long enough to receive wage raises. The employers can
be expected to replace them with younger workers offering new hires
fewer benefits, including retirement provisions. As unemployment
rises they will have little problem doing so.
capitalism is in crisis. There is going to be widespread deprivation
and little illustrates the inequities of the system better than
the differing prospects between those who have worked hard and saved
as they were told to and those who can expect to feel none of the
pain. Michael Winship, senior writer for Bill Moyers Journal on PBS,
says a look at the recent financial sector bailout activity
reveals that “The fat cats at the top had nothing
to worry their pretty little whiskers about. Not only have most
of their businesses been saved, for now at least, but they’ve already
been pretty successful at protecting their high-rolling lifestyles,
and finding bailout loopholes that allow them to keep hauling in
the big bucks.”
soon after these words are read, the county will have a new President-elect.
A lot of hope is being placed in the community organizer dude from
he is acquainted with the insecurity that plagues working people
today in the face of jobs disappearing, homes being lost and retirement
savings being decimated. It is not enough to merely hope that those
assuming leadership will act with speed and vigor to rescue those
affected, at least equal to that Washington has shown for the big banks and insurance companies. It
won’t happen automatically. Working class families and individuals
and the communities in which they live will have to insist upon
Board member Carl Bloice is a writer in San Francisco, a member of the National
Coordinating Committee of the Committees of Correspondence for Democracy
and Socialism and formerly worked for a healthcare union. Click
to contact Mr. Bloice.