Excerpts
From Can You Afford to Retire by Hedrick Smith http://www.pbs.org/wgbh/pages/frontline/retirement/view/ The
baby boomer generation is headed for a shock as it hits retirement:
many of them will be long on life expectancy but short on savings. The
two main strategies for funding retirement -- lifetime pensions
and 401(k)-style
savings plans -- are in serious trouble. In "Can You Afford to
Retire?" FRONTLINE correspondent
Hedrick Smith ("Is Wal-Mart Good
for America?") investigates this looming financial crisis and the
outlook for middle-class Americans. "I
think this is a crisis in the making," says Alicia
Munnell, director of the "I
would say, unless you're fortunate to be in the upper-income quartiles,
that you're probably going to be in for a very rough ride,"
adds Jack
VanDerhei of the Employee Benefit Research Institute
(EBRI). "You're not going to have sufficient monies to pay the predictable
expenses -- your housing, your utilities, your food -- plus the potential
catastrophic medical care costs." Half
of A
major driver behind this shift is a CORPORATE
BANKRUPTCY strategy that enables companies to terminate lifetime pension
plans through Chapter
11 bankruptcy.
"Chapter 11 has become an effective tool for reorganizing a business,"
says Elizabeth Warren, a FRONTLINE
takes viewers inside the Chapter 11 bankruptcy of United Airlines. United dumped its pension plans,
which were under funded by nearly $10 billion, on the Pension
Benefit Guaranty Corporation (PBGC), the federal agency insuring
pensions that is running a $23 billion deficit. Because the PBGC only
insures pensions up to a certain amount, many United employees and retirees
saw their pensions slashed dramatically. Robin
Gilinger, a 42 year-old United flight attendant, has seen her pension
drop by nearly 30 percent and her other benefits cut. Gilinger says
she now expects to have to work five to 10 years longer than she originally
planned. "I feel very uneasy about where I'm going
to be in 20 years," Gilinger says, "And I'm
afraid that I'm going to end up having to work my golden years doing
things that I didn't necessarily want to be doing." With
their lifetime pensions gone, the current workers of United have joined
the millions of Americans trying to save for retirement in 401(k) plans.
"Most
people we -interviewed have no idea what it costs to replace a lifetime
pension," says Hedrick Smith. "And they don't realize that as they're
living longer, there is an impact on their nest egg." To
maintain their standard of living, experts
say Americans will need to save ten times their annual pay in their
401(k)s by the time they retire. That means saving 15-18 percent of
their salaries, every year, over an entire career. By
this standard, most Americans are simply not saving enough.
According to VanDerhei of the EBRI, the
typical baby boomer is approaching retirement with only three times
annual salary -- enough to last seven or eight years.
But with life expectancies after age 65 approaching 18 years, many retirees
may be living on nothing but Social Security for a decade or more. "The
nightmare I have," says pension expert Brooks
Hamilton, "is the vision of people … outliving their retirement
income and being down to Social Security." And the shock waves may reverberate
through the entire economy. "What holds up our economy," says The change is already happening,
as retirees
find they are having to go back to work to make ends meet. Pat
O'Neill, a retired United Airlines mechanic, is now driving a truck
after his pension and benefits were cut. Winson
Crabb and Gil
Thibeau, two National Semiconductor retirees with widely different
financial results from their company's 401(k) plan, are both still working
in retirement. "What
is the meaning of retirement if the only way you can live is to work?"
asks Notre Dame professor Teresa
Ghilarducci "The answer is there is no meaning to retirement anymore.
We are now shifting from lifetime pensions to lifetime work. It's the
end of retirement." T: 949 596-4115
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