Will I ever be able to retire?
rowing old has never been for wimps. But now it's really getting tough.
A comfortable retirement, that mainstay of the American dream, is falling out of reach for millions of Americans, a legacy of the disastrous 2008 recession.
Many people who expected by now to be on the brink of their next, leisurely life are instead hoping to hang onto jobs, if they still have them. Never much on saving, these Americans in their 50s and early 60s have seen their retirement plans evaporate at an alarming rate in the housing bust, stock market crash and corporate bankruptcies that erased pensions.
How bad is it? If you are near retirement, the 2008 recession may never end for you. You may be working well into your 70s.
The Center for Retirement Research at Boston College calculates a National Retirement Risk Index showing the percentage of Americans in danger of growing poorer in their senior years. That index now stands at 51 percent — up dramatically from 31 percent in 1983.
"People are going to feel vulnerable when they should feel comfortable," said Alicia Munnell, center director.
For more than three decades as a residential real estate broker, Ron Samul routinely earned $100,000 or more a year. But the recession and housing market crash blasted a hole in that record — and in Samul's retirement plans.
Now 64, Samul of Detroit and his wife, Kathleen, a school teacher, saw their net worth cut in half by the economic crisis. Paying for college for a 19-year-old son has further pinched reserves.
"I thought I was going to have a comfortable living just downsizing my work," Samul said recently. "What I didn't understand was how serious things were going to get, or that I'd be working as much or more at this stage as I did when I was a kid."
The dilemma facing the Samuls is America's retirement crisis in microcosm. Millions of people face the same or larger roadblocks to a comfortable life after their working years — lack of savings, vanishing home equity, and pension and health care plans that are no longer rock solid, if they're available at all.
In the past few years, the pressure on retirement has gotten dramatically worse. The collapse of the housing market evaporated home values that people were counting on as investments. At the same time, many hard-pressed corporations have dumped pension obligations on the government or drastically slashed retiree health benefits.
Meanwhile, Americans' poor fiscal habits — too much spending, not enough saving — means millions of households will reach retirement age without enough money to live on.
"When people are thinking about retirement, they need to be reassessing their entire situation and realize that the game is totally different," said Jonathan Citrin, a Birmingham, Mich.-based financial adviser. "There really is no margin for error anymore."
If this crisis in retirement has not yet hit home for many people, it may be because many of today's retirees seem to be doing OK, with pensions protected along with health plans to augment Medicare.
It's an ideal that is quickly becoming a thing of the past.
Munnell said almost no Americans will escape the coming crisis in retirement. Well-to-do Americans may weather the storm better than those less well-off. But the pain will be felt across the entire income range.
"The low end, you really are going to see hardship, the lack of resources that people absolutely need," Munnell said. "In the middle, I think you're going to see stress and worry about money and very limited ability to actually participate in society. And upper-income people are just going to be disappointed."
This looming retirement crisis would not exist but for one unassailable truth — Americans keep living longer.
While people born in 1900 could expect to live just 49 years, post-World War II baby boomers can look forward to 68 years on average and babies born today have a life expectancy of 78 years.
Longer life spans coincided with the post-World War II economic surge to create a modern ideal of retirement. Instead of a few short years marked by hardship and infirmities, middle- and working-class Americans are now supposed to be able to look forward to many years of leisurely retirement. Medical advances such as hip and knee replacements and cataract surgeries mean mobility and eyesight can be maintained.
By another happy coincidence, housing prices soared for decades, effectively underwriting retirement for many people. And as the stock market boomed, labor unions won decades of better retirement packages for their members.
Danjin remembers those postwar decades as a bountiful time.
"Real estate was appreciating like crazy," he said. "Hell, by 1971 I was in my third house. I was living in a house on Square Lake in Bloomfield Hills. I was a tradesman. I was a union rep. I had more money than I knew what the hell to do with."
It wouldn't last.
The phrase "perfect storm" is overused today, but it certainly applies to the retirement crisis. As Americans live longer, multiple threats are combining to turn that postwar vision of the golden years into one of uncertainty and struggle.
One is the destruction of the private pension system. In the reach for profits in recent decades, more and more corporations have capped or eliminated their pension plans, pushing employees instead to self-managed investments.
In 1980, about eight of every 10 workers in private industry were covered by a pension plan. By 2009, that number had shrunk to less than a third.
If workers had pumped sufficient money into their new retirement accounts — IRAs and 401(k)s — they might have offset the loss of a steady pension check. But they didn't. By various estimates, one-third or more of Americans eligible to contribute to a 401(k) did not, and many who do contribute don't put in enough.
Part of the reason for that is that many people considered their home to be a growing investment and the only cushion they needed for retirement. Americans' savings rate fell to almost zero in 2006 from nearly 8 percent in the early 1990s. But the idea of using a home as a savings bank died with the bursting of the nationwide housing bubble in 2006, which triggered a tidal wave of foreclosures and a drastic loss of home equity.
That leaves Social Security, which provides an important — indeed, for many the only — source of income in old age. But even if the system survives, its current funding problems with benefits intact, over time it will provide less of a cushion.
Other, unrelated trends have added to retirement woes. In recent years, women have been having children later in life, meaning parents will be paying for college in their mid- to late-50s instead of using those years to save for retirement, as an earlier generation did.
Moreover, roughly half of all retirees begin drawing Social Security early, at age 62, even though the monthly benefit is much smaller than if claimed later. Claiming benefits at 62 brings an average monthly check of $1,000; claiming at 70 brings $1,700. The size of that check could make a big difference when retirees are in their 70s and 80s.
But amid all the retirement gloom, there is a ray of hope, although not the one many working people want to see.
It's work. Delaying retirement even a few more years can do wonders to ease the financial strain. Active workers retain their health benefits longer, and they reduce the number of years their retirement savings must cover. Savings balances have more time to grow from paychecks, and Social Security can be delayed to get a bigger monthly check.
"Future retirees need not panic," Munnell and co-author Steven Sass write in their book "Working Longer: The Solution to the Retirement Income Challenge." ''A few years of work can make retirees in 2030 as well off as those in the current generation."
Nor does working longer mean remaining in the harness until you die. Munnell and her colleagues calculate that even two to four extra years of work can help maintain a reasonable living in retirement. "In other words, working longer does not mean working forever," they write.