Setbacks can derail retirement savings

[question everything]

Setbacks can derail retirement savings

By Helen Huntley
ST. PETERSBURG TIMES

May 21, 2006

Here's another reason to start saving for retirement as soon as you start working: If you wait until the last minute, life might torpedo your plans.

For many people, the 50s and early 60s are peak years for accumulating retirement savings. In an ideal world, end-of-career salaries are high and expenses decline as children leave home. But in the real world, things often go wrong.

That's what Boston College researchers found when they analyzed the lives of a group of adults who were 51 to 62 in 1992 and who were interviewed regularly over the next 10 years as part of a national study. The vast majority – 69 percent – experienced some type of major negative shock in that decade. When shocks to spouses were included, only 18 percent sailed through unscathed.

“Life's uncertainties can upend the best-laid retirement plans,” Richard Johnson, Gordon Mermin and Cori Uccello wrote in “How Secure Are Retirement Nest Eggs” (available at www.bc.edu/centers/crr).The most common shock was a new diagnosis of a major medical condition, with heart problems the most frequently mentioned. One-third said their health limited their ability to work. Workers with less education were most likely to have health problems. But job loss was just as common for college graduates as it was for high school dropouts. For married people, divorce was the most financially devastating event. For singles, it was becoming disabled and unable to work. Other serious financial shocks included widowhood and entering a nursing home.

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Find this article at:
http://www.signonsandiego.com/uniontrib/20060521/news_lz1b21setback.html

[Warpy]

1. Yeah, that's what they always say

but they fail to acknowledge life patterns that have low earnings in the 20s and 30s that go toward rasing a family, getting established, buying that first piece of property, and generally just surviving. Add to that the fact that wages simply never have recovered to their 1970 purchasing power, and we were poor then, and the author of this article would seem to be indulging in a lot of victim blaming.

I once read an article condemning older boomers for not saving $2000/year when they were first starting out. My first salary came to $2557/year. Once taxes and social security were deducted, that left me with just a hair over $2000. What was I supposed to live on?

In other words, if you're born to the upper middle class, have iherited enough of a trust fund to live on, and find yourself with an Ivy League education and a job near the top, by all means start to save in your 20s. It's the prudent thing to do.

However, expecting those who are ordinary folks with ordinary incomes and ordinary life patterns to follow suit is sheer lunacy. It's why we had pensions. It's why we have social security.

[question everything]

5. This is why it is so important for a Democratic Congress

to concentrate on real issues for real people, and this does NOT include impeaching Bush.

An excellent program on Frontline last week pointed out that, first, 401K was never meant to be a real saving account but was something added as a tax relief for executives of Xerox and Kodak; that the contribution of employers to retirement accounts - whether defined pensions or 401K has gone down.

We need to force employers to put 50%, not 5% into employee's retirement accounts. And yes, it has to be the 401Ks, not pensions, since many companies may not exist when it is time to retire.

Still, there are people who buy their $5.00 latte every day, there are people who spend $150 on sneakers for their kids (or more, I have not followed that trend), there are people who purchase macmansions and then a ton of money to heat and cool it, and to maintain it.

An interesting interview several months ago about people in their 40s and 50s who put money into college education. The guest's comments was to compare this to those directions on an airplane in case of a dropped pressure: first put the mask on you, then on your child.

First put money into retirement account. The kids will get by. They may have to work part time, they may have to go to a state college instead of Ivy League, they may start at a two year community college and then transfer, but at least they won't have to support their parents when they have retired and have to rely on Social Security as the sole source of funds.

[wordpix2]

2. the trend is toward part-time jobs without benefits but the bosses expect

you to work 30 hr. per week as "part-time," giving you not much time to work for someone else "part-time" to make enough to pay for your own benefits. This is what happened in my workplace.

[SoCalDem]

3. I hate these "studies" .. They are NO-BRAINERS

When people are young, and having families, there is NO "extra" money...and as they age, they lose control over their lives. We may WANT to and PLAN to work until the OFFICIAL retirement age, but unless we are self-employed, we do not have control..Until there is national health care, we will continue to see 40 and 50-somethings jettisoned because their employer can always find younger cheaper people..and if insurance is offered, the more "older" folks in the pool, the higher the cost to the employer..

We are all ultimately expendable :cry:

Boomers will turn out to be the Kleenex Generation.. Use it, wad it, toss it in the trash./

[GrumpyGreg]

4. Boomers the Kleenex generation?

I think not. Most Boomers spent many self indulgent years and now that they are getting older they are whining.

Getting old and getting tossed aside has never been fun for any generation and the Boomer experience is no different.

They should tighten their belts,toughen up, and get used to it.

[mcscajun]

6. We haven't all had self-indulgent years.

And many of us ARE getting tossed aside.

In my own case, it was only in the Clinton years that I finally found my head above water for a while, and managed to see my way clear of debt and look forward to really benefiting from my new, hard-won place in the middle class.

Then came the Bush years, and the economy tanked, my work went to India, and the Peak earning years in which I expected to fix my home, buy some decent furniture, travel a bit, and really sock away the bucks for my old age went POOF in an instant. I'm working part-time now for a fraction of what I used to earn and using my savings to pay my mortgage. I'm early retired not by choice, but to keep my medical benefits, and I'm way UNDER-employed. I missed out on my "self-indulgent years".

Don't buy into the myth that all Boomers were/are spoiled indulgent whiners.

I came from nothing, worked hard, got an education, and did what was necessary to get what I had. Now, I'm going to have to struggle to keep it, and live in markedly reduced circumstances than what I'd hoped for. At least I'm used to nothing, so I don't fear it quite so much.

Outsourcing and offshoring are a relatively new phenomenon, the social contract between employers and employees was broken on our way up...so I think "Kleenex generation" is a pretty apt one.