October 23, 2008

The Retirement Crisis No One Talks About

Many of us have seen our retirement savings dwindle alarmingly over the past several months, and the press has covered that story. But when they mention people losing their retirement savings thanks to the stock market meltdown, journalists (who tend to be younger people) follow that up by saying, "People will have to work longer" as if working longer would solve the problems posed by losing most of your retirement income.

But many of us won't have the option of working longer.

Why? Because not everyone ages well. In fact few people over 70 have aged well enough to be able to work a 40 hour a week job that pays enough to cover their bills--even if they could find such a job, which is by no means certain.

Many older people do continue to work after retirement, usually part time and often in jobs that are far less stressful than the ones they retired from. But with advancing age several things happen that make it increasingly hard to hold the kind of job that earns enough to let a person live at even a level of genteel poverty.

Energy levels drop. This may be due to subtle metabolic problems, but even in the healthiest old people changes associated with normal aging may cause them to develop problems with sleep which prevent them from getting the rest that they need.

Hearing and vision begin to fail. This process might be accelerated for people with problems like diabetes, but even in the healthiest older people genetics seems to play a large role in age-related hearing loss and the likelihood of developing age related macular degeneration, which is the most common cause of blindness in the non-diabetic elderly.

Mobility becomes a problem. Joints wear out after 70 or 80 years of use and everything from walking to typing on a keyboard becomes more painful. Ironically, the popularity of running, biking, and other sports that hasten the deterioration of joints may make this an even bigger problem for the Baby Boom generation than it was for our elders whose idea of "exercise" was more likely to be a gentle stroll around the golf course rather than training for a marathon.

The brain deteriorates. This, when it comes to aging, is the elephant in the room which no one likes to talk about. Yes, there are those "wonderful" old people who are a sharp at 90 as they were in their teens, but they are a tiny minority. For most of us, the progress from our 50s to our 90s will involve subtle deterioration of our memory, our ability to think creatively, and most importantly, our judgment.

Most of us assume that we will know it when these changes occur and be able to ask for help. But those of us who have watched our parents age know that the exact opposite happens. As mental functions decline people rarely are aware that their ability to think is deteriorating. They may also develop paranoia and react very badly to anyone who tries to intervene--including an employer who may be troubled by evidence that the older employee is making mistakes that could harm the business.

These issues, a mix of which affect most older people to some extent, is why there comes a time when most people have to retire and why it is so important that there must be some way to support old people through the period--which is often a long one--after they are no longer able to earn their own livings.

We already knew that a major crisis is looming ahead in America as the Baby Boom population as a whole has never had the kind of savings that its parents accumulated. Some of this was due to people spending more than they should have, because of the Consumer Culture which urged them to buy things they really could not afford.

But I don't think this is the whole story. Many people of my generation have not been able to save because real wages have been stagnant for years and many hardworking people of my generation have never been able to earn more than it took to pay for housing, food, transportation, heat, health care, and eduction for their kids.

The loss of money invested in the "safe" vehicles that have been sold to us as ideal for our retirement nest eggs will force a lot of people of the Baby Boomer generation into the same needy situation they once thought would be the fate only of those who had been imprudent.

Social Security will help some people far more than others. Those who are winners are those who earned large salaries throughout their working lives. They may get payments in the $25,000 a year range which is enough to prevent poverty.

But for those of us who worked in the kinds of careers that do not produce large salaries or who took time out to raise children, or whose health problems made it hard to work full time in our younger years, Social Security may provide as little as $12,000 a year. And given that the median family income in our nation hovers around $42,000 a year, this is the situation most American workers fall into.

So what happens when you have many tens of millions of aging Baby Boomer people who do not have the physical ability to work at jobs that could pay enough to cover their costs for shelter, food, heat, and health care? How far are they going to get living on $1200 a month? Who's going to be looking out for them? What can government do now that so much of our national assets have been squandered on unnecessary wars and bailing out the super rich who have paid for the lobbyists who have written our national tax policy for so long?

One thing is certain: We're going to find out.


Anonymous said...

One of the big issues here is the increased cost of chronic-illness-related medical care increasing average longevity, and a medical ethic that places longevity over quality of life. A bigger issue is costs related to the deterioration of the family. By this, I don't mean divorce, remarriage, and blended families -- nor do I mean the shrinking size of the average nuclear family. I mean the job mobility that moves grown children hundreds of miles from their parents, siblings hundreds of miles away from each other. In generations past, the closeness of family members meant that there would always be someone to watch out for the elderly parent, aunt, or uncle -- someone to take her (or him) in, and the oldest generations could also keep a weather eye out to make sure the youngest generations did not get into trouble. Instead, we have daycare watching our children and nursing homes warehousing our parents. A third issue is the projected decrease in lifespan due to poor diet and lack of exercise. I'm already seeing this happen, the pattern starting with my grandparents and my parents.

Unknown said...

This is a very timely issue. Particularly as many of this generation are about to help select a new president, it seems like the issues they are most concerned about vary by two things: social class and age. Older people with little to worry about retirement-wise seem to be supporting McCain with the idea that he looks like them demographically and ideologically; older people without financial security post retirement are supporting Obama because they recognize the need to redistribute wealth to themselves and others in their situation. (I realize this is a very simplified breakdown - these are not cut and dried categories.) Sadly, there are folks out there who are older who don't know to be worried either because they aren't financially "literate" enough to know what happens when they officially retire or plan to rely on their children who may or may not be able to support them as time goes on; these folks support McCain anyway even though it isn't in their best interests.

For folks my age (the 18-30 crowd), we sometimes unfairly blame the older generation for not anticipating the situation you describe. We didn't have anything to do with voting for the past administrations that seem to have done little to help those in the middle to lower tax brackets. And we're having a hard time breaking into our first jobs to start our careers and begin saving for our retirements because there are so many qualified experienced people in those jobs already. Not surprisingly, we're wondering how the Baby Boomers can justify giving us this screwed-up system as our inheritance. Yes, we're young and still strong and smart - that doesn't mean we can take this system that the political neglect of the past 30 years has produced and change it. We're hopeful that we can but we also know just how stubborn and paranoid our parents' generation is, particularly when it comes to redistributing wealth. We just hope the Boomers get their heads screwed on right before they dig their own graves.

Thanks for posting this Jenny - I always appreciate your perspective on the medical and the political.

Anonymous said...

This is an issue, like so many others that leadership has been aware of for decades but chose not to address. The time is running out to do anything about it, but the difference is that the elderly are a large voting block that will respond predictably to any effort to change benefits (and why should they?). I think all of this points to an undeniable reality: healthcare is going to become a bigger burden to society in the coming years, largely because so many will, in fact, be receiving socialized medicine we know as Medicare. Perhaps the appropriate thing to do is to consider opening Medicare up to society at large which will remove a huge burden from private enterprise and enable policy makers to make rational decisions and choices rather than the current "system" (a misnomer if ever there was one).

Jenny said...

Well, plenty of us Boomers DID try to change things, but unfortunately, we got outvoted, often with a coalition of the more conservative generations younger and older than us.

Anonymous said...

Yes, I agree with everything you said Jenny. It's kind of scary for me - I just retired in September - bad timing or what!! Had planned to use my 401K supplement my pension - but as someone else said - my 401K is now a 201K. I don't think I will be able to wait long enough to see the market rebound to the level that it was last year when I planned my retirement financing.

And yes, I don't think it is getting enough press. I'm not sure if older people realize what's happened to the value of their accounts. Unless they monitor their accounts themselves they won't know the impact until they get a statement. That will be a real shocker for many.

For me the cost of health care is a huge concern - 1/4 of my pension payment goes for insurance premiums. Then there is the out of pocket for co-pays and prescriptions. Even with this, I think I'm better off than some - I just hope they don't cancel the insurance.

If this doesn't turn around, I don't see how people will be able to keep up.

Jenny said...

BTW, it's worth noting that even with all the health scares we read about, people are on average living much longer than they were a few decades ago.

That is partly because we have much more effective treatments for stroke, heart attack, and many forms of cancer.

People therefore live through conditions that would have killed them.

Unfortunately, they often live on with severe health problems and often with major mental deficits caused by the illness or the treatments that kept them alive.

For example, chemotherapy is now known to cause subtle forms of damage to memory and in the elderly this damage may be far from subtle.

ItsTheWooo said...

I'm a new RN at a long term care facility, and I am seeing first hand what happens when we aren't one of the lucky ones who ages well. "Living death" puts it mildly. Severe dementia is one of the most tragic conditions there is.

I expect aging in this country without sufficient savings to be like landing on a knifes edge. Depending on how competent you are will determine if you spend your golden years; either in "ordinary poverty" or if too demented to live independently you become a ward of the state, living in a long term care facility paid for by medicare.

Anne said...

I reach retirement age and the economy collapses - what great timing. I plan to work 1/2 time next year so I won't have to touch my 401 yet. I hope this works for me. I am glad that I am healthy enough for work. Five years ago I was very ill. I was close to giving up but lifestyle changes turned around my health.

tmama - I can relate to your comment about deterioration of the family. My family is spread out from coast to coast.

Jenny said...


The really frightening thing is that there are nowhere near enough beds for all the boomers who are going to need long term care, and by the time they notice this, it will be like when they noticed that there was no room in the school and colleges for us in the 1960s and in day cares in the 1980s.

The problem will take 10 years to even start being addressed and meanwhile there will be a huge population of people completely unable to care for themselves with nowhere to go.

I don't think anyone can realize the extent of this upcoming crisis until they have spent some time in what is so euphemistically called "long term care."

Anonymous said...

tmana said . . .

In generations past, the closeness of family members meant that there would always be someone to watch out for the elderly parent, aunt, or uncle -- someone to take her (or him) in.

There are many people who have taken on the role of caregiver for their elder. As one myself, it is a very tough job.

The "miracles of modern medicine" have enabled us to live longer than we should. I know this sounds harsh, but when there is no quality of life, what's the point.

I see it with my mother who is 91 and until a few months ago lived home alone with my assistance - which meant being there for a few hours every day - she is blind from age related macular degeneration, has age-related dementia, debilitating osteoporosis and can't get out of bed on most days, she finally fell and broke her hip, which landed her in a nursing home.

But her Dr. says proudly that she has a strong heart! Great!!

She even says that she's lived too long, has no enjoyment in life and is basically just existing.

Many of these age related ailments weren't as common years ago when people didn't live as long. Nowadays our bodies have more time to deteriorate in these new and horrible ways.

I see an increase in the lifespan due to medical intervention. When I see her and others like her in the nursing home it makes me want to cry -


Anonymous said...

When Thatcher ran the UK there were three million unemployed. Today there still are but the "official" number has been reduced by not counting a lot of unemployed people. Not only that but many jobs are very low wage. Either way it is simply not going to be possible for a lot of people who want to work to continue to do so, or for those who do continue to save for their retirement. Add in the lost money of those who had already saved and despite the NHS the situation this side of the Atlantic looks no less dire in the long run.

Rick Darby said...

It seems very likely that there will need to be more public support for healthcare and other needs of the aged. Regardless of whose fault it is — and there's not much point in assigning blame at this late date — a lot of people are simply not going to be in a position to take care of themselves once past their primary earning years.

However, Sarah S. and others: You cannot solve the problem by "redistributing wealth."

First, there is a moral issue: why should people who have worked and saved and been provident have their "wealth" taken away and given to others?

Second, when you try to "redistribute" the money of the rich, they won't put up with it. They will just move their money offshore and engage in fancy tax avoidance schemes. Disapprove of it all you want, but that's human nature.

Third, there is a terrifying political risk when you give the government power to define "wealth" and "redistribute" it — you are giving it totalitarian control. At your youthful age, having (I presume) lived in the United States with a (so far) relatively benign government, you may have infinite faith in the goodness of government, but that is not an inherent quality of governments, here or anywhere.

If money is to be available for public spending on improved healthcare and support for retirees, something's got to give. You can't create money from out of the air except by inflation, which reduces the value of everyone's savings. The welfare state is going to have to be shut down in other areas.

I would start by absolutely ending welfare payments to illegal immigrants and drastically reducing immigration, period. If the elderly need help in supporting themselves so they can have a decent lifestyle, it's insane to be subsidizing illegals having "anchor babies" and using emergency rooms for free doctor visits.

You can have a welfare state or you can have open borders. You can't have both.