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It was fun
while it lasted. We Baby Boomers got to diss our
elders when we were young and borrow without restraint through middle-age.
Few generations have traveled such a smooth stretch of
financial/psychological highway.
But now that
we're...old...the world we created isn't so congenial. Our savings are
inadequate, jobs are scarce, and retirement, as a result, is out of reach for
many of us. We are, in short, reaping what we've sown these past four
decades. From today's Wall Street Journal:
Oldest Baby Boomers Face Jobs Bust
Many older Americans fear they will be working well into their 60s because
they didn't save enough to retire. Millions more wish they were that lucky:
Without full-time jobs, they are short of money and afraid of what lies
ahead.
Deborah Kallick was a professor of biomedical chemistry at the
University of Minnesota until she ventured into the private sector in 2000
with a job in genome research. She is now one of more than four million
Americans aged 55 to 64 who can't find full-time work. That number has nearly
doubled in five years, according to U.S. Department of Labor figures in
October.
Ms. Kallick,
60 years old, has been unemployed since 2007 and lives in the Northern
California home of an ex-boyfriend. She has run out of unemployment
insurance, used up most of her retirement savings and is indebted to
relatives and credit-card companies.
A good job
could settle her accounts, she said. Until then, Ms. Kallick
relies on generosity, occasional consulting work and the sale of sweaters,
purses and other possessions on eBay.
"It is
very hard to work through this and learn to be calm and happy day to
day," said Ms. Kallick, who never married.
"It has taken a lot of strength and courage to learn to do that."
Older Baby
Boomers are trying to postpone retirement, as many find their spending habits
far outpaced their thrift. With U.S. unemployment at 8.6%, and much higher
among people in their teens and 20s, younger members of the labor pool accuse
Boomers of refusing to gracefully exit the workplace.
But their
long-held grip is slipping, as employers look past older Americans to
younger, cheaper workers.
The Labor
Department counts people as unemployed only if they have looked for a job in
the previous month. By that definition, 6.5% of workers aged 55 to 64 were
unemployed in October, below the national average but more than twice the
jobless rate for the group five years earlier.
Taking into
account the number of older people who want full-time work but are
unemployed, working part-time or need a job but have quit looking, the
percentage jumps to 17.4%, or 4.3 million Americans ages 55 to 64, according
to the government data. The number has grown from 2.4 million in October
2006.
This group
without full-time work now accounts for more than one in six older Americans
seeking positions.
In some ways,
older people are doing better than everyone else: Among all U.S. workers, 20%
are unemployed, underemployed or have given up looking for jobs. But older
people have far less time to rebuild savings.
"This is
new. It is different. It is worse than we have experienced before and it is
very widespread," said Carl Van Horn, head of the John J. Heldrich Center for Workforce Development at Rutgers
University. "It is going to get worse. You are going to have a higher
level of poverty among older Americans."
Older people
have more trouble finding new jobs. Among unemployed workers older than 55,
more than half have been looking for more than two years, compared with 31%
of younger workers, according to the Heldrich
Center. Among older workers who found a new job, 72% took a pay cut, often a
big one, the Rutgers data show.
The problem
has been building for decades: Inflation-adjusted, middle-class incomes have
stagnated in parallel with a free-spending culture of indebtedness that has
left many Americans with too little saved. Over the same time, many U.S.
companies cut pensions and shifted to less-generous retirement-savings plans
such as 401(k) accounts that have stagnated or diminished in the market
tumult of past years.
Older
families aren't just failing to save, they are
increasingly draining accounts that were supposed to help finance retirement.
The median
household headed by someone aged 55 to 64 has $87,200 in retirement accounts
and other financial assets, according to Strategic Business Insights' MacroMonitor database. If each of the 4.3 million
unemployed or underemployed people in this age group runs through half the
family savings, that will, in theory, total $188 billion in lost retirement
money.
The typical
retirement-age household has too little saved to maintain its standard of
living in retirement, according to actuarial and Federal Reserve data.
Financial
planners often advise that retirement resources be large enough to provide
85% of a person's working income. Median households headed by a person aged
60 to 62 with a 401(k) account have saved less than one-quarter of what is
needed in that account to live as well in retirement, according to Fed data
analyzed for The Wall Street Journal by the Center for Retirement Research at
Boston College.
The trouble
spreads across generations. Older people hang on to jobs or, out of
desperation, take lower-level jobs for which they are over-qualified. Either
way, they displace younger workers.
In the past,
older people who lost jobs often gave up and retired. No longer. In October,
two-thirds of people aged 55 to 64 had jobs or wanted them, up from 59% in
1994, according to Labor Department data.
At an age
when they should be generating peak incomes and savings, many unemployed and
underemployed Americans are applying for early Social Security benefits and
spending what's left in their retirement accounts.
Kathi Paladie, 64 years old, lost
her job as an executive assistant at a mortgage company in Tacoma, Wash., six
years ago. She hasn't found full-time work since but works occasionally as a
phone interviewer for a political survey firm.
Her
retirement savings is spent, and she said her monthly $800 Social Security
checks, $100-a-week unemployment benefits and occasional paychecks barely
cover expenses.
"If I
don't buy a lot of groceries, then I am OK," said Ms. Paladie, who is divorced. "I do a lot of puzzles
sitting here and watching TV. And I play with my bird. And that's about
it."
She rarely
goes out, she said, "but I've got a clean house." To save money,
she sometimes eats Frosted Flakes for dinner. She shares them with her
African Grey parrot, Muffin, who also likes the sweetened cereal.
Ms. Paladie hasn't been to the doctor for five years, she
said. She frets about paying rent after her unemployment benefits run out
next year. Her daughter lives nearby but doesn't have the room for her, Ms. Paladie said. "It is kind of a standing joke,"
she said, "that if this fails, that I can always move in with them and
sleep in the garage."
The problem
of older, out-of-work Americans extends beyond individuals to the U.S.
economy. Among jobless people aged 55 to 64 who want to work, lost annual
wages exceed an estimated $100 billion, based on the median income of this
age group.
Retirement
savings losses exceed $10 billion a year, assuming contribution rates of 8%
for employees and 2% for employers. Even if only half the people were
working, the economy would gain $50 billion a year in income and another $5
billion in retirement savings.
That doesn't
count the lost wages of people who have taken salary cuts to get new jobs.
Richard
Foster, 59 years old, a former computer programmer and software analyst in
Arvada, Colo., near Denver, has been unemployed several times over the past
decade. The older he gets, the more trouble he has finding jobs in computer
mainframes, his specialty, amid changing technologies. And the longer his
absence from programming, the harder it is to attract recruiters, who prefer
people with experience in the past six months, Mr. Foster said.
These days,
he works on the telephone nearly full-time as a customer-service
representative. His employer grades him on how fast he finishes each call and
how customers rate his service. Mr. Foster recently contracted Bell's palsy,
a temporary facial paralysis thought to be stress-related.
The work pays
a lot better than a previous job, delivery driver for a dry cleaner. Still,
Mr. Foster said, it pays 40% less than what he earned as a programmer at the
University of Colorado Hospital, a job he lost in a restructuring that kept
more tenured employees.
Mr. Foster's
wife, Tina, has complications from a detached retina, which keeps her from
working. Her treatment is only partially paid for by his medical plan, which
classified Ms. Foster's eye problem as a pre-existing condition.
He has a
retirement-savings plan at his new employer, he said, but it's hard to save,
given the couple's struggle "to make ends meet day to day." He is
putting off dental work, for example, to save money.
While out of
work, Mr. Foster said, he sometimes depended on food banks. He filed for
personal bankruptcy in 2003. He and his wife got a break recently: his wife's
sister and her husband helped them purchase a home. Mortgage payments to his
in-laws are less than his rent. Retirement? He said he has no idea when.
Mr. Foster's
worries aren't unusual. More than two-thirds of unemployed people older than
50 report extreme stress, trouble sleeping or family strains, according to
surveys by the Heldrich Center at Rutgers. More
than 60% of respondents said they didn't expect to hold another full-time job
in their field and a similar percentage said they were pessimistic about
finding any job soon. One-third of those over 55 reported selling possessions
to stay afloat.
In another
unfortunate consequence, the younger people are when they apply for Social
Security retirement benefits, the lower their monthly checks for the rest of
their lives. Two-thirds of Americans older than 50 expect to file for the
benefits earlier than they would prefer, or already have done so, according
to the Rutgers survey.
"People
are taking in boarders, they are moving in with their kids, selling their
homes for the cash that they can live on," said Abby Snay,
executive director in San Francisco for JVS, a community agency that teaches
work skills.
Although her
agency has long focused on young people, the fastest-growing client group is
closer to retirement age. Before the recession, only 11% of her clients were
older than 55; now, it is 17%.
"We are
seeing people in a panic, in survival mode," she said. "They are
about to finish their financial assets and all they have after that is their
retirement funds. They are trying to figure out some kind of bridge so they
won't have to pay an early withdrawal fee for their retirement incomes."
Ms. Snay has even seen former donors return as clients.
"There is a level of shame and humiliation," she said, "and,
'What have I done wrong?' "
She recently
offered older clients a workshop on the website LinkedIn. She recalled some
people said, "'If I put up a picture, no one will hire me.'"
Her response:
"We advise people to put up a photo, put their best foot forward."
Some thoughts
Where to
start? Maybe with the observation that prolonged good
times produce a lack of foresight. If the world is only going to get better,
worrying about the downside and planning for it is wasted effort, since there
will always be resources and opportunities more than adequate for tomorrow's
challenges. In evolutionary biology terms, late-20th century America selected
for optimistic, present-tense people.
But that
attitude and the behaviors it engendered -- borrowing rather than saving,
building excessive entitlement and military structures, breaking the dollar's
link to stabilizing forms of money like gold -- inevitably convert good times
into hard times, in which an optimistic, present-oriented perspective begins
to look like utter cluelessness.
In retrospect
it seems so obvious. If Boomers had been paying attention, instead of buying
4,000 square foot houses, new cars and big screen TVs, we'd have reacted to
rising indebtedness by living small and saving big from the 1980s onward.
Instead of voting for whoever promised the most free
stuff, we'd have demanded balanced budgets and hard choices.
But we
didn't. We became "consumers" rather than builders. Our savings
rate was near-zero for much of this time, and our debt ballooned during what
should have been our prime saving years. So what's coming isn't a natural
disaster. It's the result of choices made by intelligent, well-educated
people who should have known better.
Today, if
you're 55, haven't saved a lot of money and can only find part-time work, the
math is pretty clear: you'll never retire because you'll never accumulate any
more capital.
And the truly
sad part of this story is that there's no solution. As the debts we've taken
on really bite in coming years, the US (and Europe and Japan) will be
presented with the choice of liquidating excessive debt through default
(producing massive job losses for marginal workers and eliminating the whole
concept of retirement for most people) or inflating it away (evaporating the
nest eggs of savers who own bonds, cash, or bank CD, also making retirement a
lot harder). Either way, Boomers are the main victims.
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