Retirement used to be synonymous with leisure and travel. Americans believed that decades of hard work and thriftiness would make for a prosperous and successful life they could enjoy after their jobs – the "American Dream."
Now retirement doesn't evoke the same sense of tranquility for most U.S. workers. Instead, economic anxiety has taken its toll.
Americans used to ride a "three-lane highway" into retirement: a traditional pension, Social Security, and individual savings plans, like 401(k)s.
But the recent economic downturn packed a devastating punch to many 401(k) accounts, U.S. households have dipped into savings to make ends meet, and debt-laden federal, state and local governments will have trouble meeting pension and Social Security obligations.
As the first of the 78 million U.S. Baby Boomers start to retire, most of them worry they don't have enough retirement savings to support them in their post-work years.
A nationwide public opinion research study released last week by the National Institute of Retirement Security found that 54% of those polled are very concerned about the effect of economic conditions on their ability to have a secure retirement. About 78% felt the average worker was unable to save enough on his or her own to guarantee retirement, and 73% said stock market volatility made predicting retirement savings difficult.
Only 11% of respondents expected to be able to spend retirement money on travel or leisure activities, a testament to how low U.S. retirement expectations have fallen. The rest hoped to live comfortably, pay their bills and afford increasing healthcare costs.
Seeing the U.S. government continually clenched in political gridlock isn't helping calm the nerves of future retirees.
Those surveyed felt Washington wasn't in tune with Americans' retirement concerns. They said lawmakers spent too much time arguing over issues to actually quell retirement fears. More than 80% of people surveyed said the flaws in America's retirement system have been exposed and are in dire need of repair.
One solution some economists advocate is raising the retirement age to generate more tax revenue and reduce the costs of pensions and Social Security benefits.
A recent study by the research group American Enterprise Institute showed that the Social Security system would be in better financial health if the eligibility age for early benefits was raised to 65 from 62.
Raising the retirement age "could encourage Americans to remain in the workforce longer, significantly increasing their retirement income, boosting economic output, and increasing tax revenues," wrote Andrew G. Biggs, the study's author.
But others argue that an age change isn't realistic since a weak state of U.S. employment has left many workers over 55 without jobs. The unemployment rate among that age group is at its highest level in more than 60 years, leading many to file for early Social Security benefits.
This prompted last week's Money Morning "Question of the Week": Are you worried about your retirement savings? Are you concerned that the money you have won't be enough to support you? Have you been burned by the market when it comes to your retirement? Have you found a retirement saving strategy that works?
The following reader responses express a variety of retiree concerns and strategies – such as fleeing the country in search of less worrisome retirement years.
Worried It Won't Be Mine
My concern is downright, flat out, government confiscation of pension plans as well as IRAs and 401(k)s.
It's being done in Europe. Heck, why not here?
– Jane G.
Feeling More Secure in Ecuador
I took an early retirement three years ago, because of an incentive that my employer offered. I receive a pension that is not enough to live on in the United States, so my wife and I moved to Ecuador at the end of last year. The cost of living is much less here, and I hope to be able to increase our financial reserve, rather than see it continue to dwindle. At the same time I have an IRA that is not large enough, and I am spending quite a bit of time reading and studying trying to figure out how to invest it so as to keep it growing. I am not yet tapping into the IRA, and I hope not to for several years.
We took our time, scoped out the location before actually moving, and are settling in. I watch markets and events in the United States and world. I do not know that this is the best move we could have made, but I am sure that it is miles ahead of doing nothing, or looking for another job in the United States at my age.
The relief that I have felt since arriving here is tremendous. I sleep much better, largely because at the very least I feel that I am acting to prepare for the future, rather than waiting helplessly for the next crisis.
– Gordon F.
Stung by the Market
As an 85-year-old military retiree, I got stung in the stock market several years ago. So, for the past 10 years or so, I have invested in munis. The least any of them are paying is 5% double-tax-free.
– Ben H.
Concerned About Non-Existent Social Security
In order to save Social Security, government is proposing that we should limit benefits to higher-income workers and require them to pay Social Security taxes on all wages, further reduce the total benefits paid to early retirees, reduce benefits for people who are 45 or younger, increase the age at which people are eligible to receive full retirement benefits from 67 to age 70, and increase Social Security taxes for all workers.
I thought former President Ronald Reagan already saved Social Security!
In 1983, didn't President Reagan make an agreement with then-Speaker of the House Tip O'Neal for a $165 billion bailout of Social Security and the gradual increase in the retirement age from 65 to 67? They also dramatically increased payroll taxes from 6.15% to the current 15.2% shared between employees and employers, brought new federal workers into the system, and for the first time, taxed Social Security benefits. We were assured that the new Social Security benefits tax was meant only for upper-income recipients. Conveniently, however, it was never indexed to inflation, meaning that more and more people have gradually had to pay it over time.
So what did government do with all the money?
Well, the 1983 amendments also included a provision that excluded the Social Security Trust Fund from the unified budget. This is just political jargon for taking it "off-budget." It is a political way of using a cash budget instead of the more appropriate accrual budget normally used for all the budgets in the U.S. government. It is a way of disguising total spending.
The government has since borrowed all of the money that was to have saved Social Security from the Social Security Trust Fund, and replaced it with IOUs.
So what's going to be different this time?
Folks, we have tried doing this once before; they lied to us! What makes you think they will do anything differently this time? We must learn one important lesson from all this – Congress will never quit spending. Any entitlement benefits that we sacrifice of ourselves, be it Social Security or Medicare, will only get spent in some other way. Like hiring more government public sector employees, increasing their pay, health and retirement benefits.
This is not the way to solve this crisis; the only way is to stop government from spending money foolishly. Until then, we can give up all our Social Security and all our Medicare and it won't make a bit of difference, as long as government continues its reckless spending of our money.
We have to put our collective foot down and say, "No, you are not going to get any of my Social Security or Medicare to pad your pockets anymore … It's about time that you did some sacrificing yourselves!"
– Lorne D.
Be sure to answer next week's question: What are your five biggest worries? What are the five main economic or financial concerns that most concern those in your household? What issues plaguing the U.S. or global economy are most worrisome for you? Why do these issues hit closer to home on your economy radar? What are you doing to financial deal with these concerns?
Send your answers to email@example.com.!
Is there a topic you want to see covered as a "Question of the Week" feature? Then let us know by e-mailing Money Morning at firstname.lastname@example.org. Make sure to reference "question of the week suggestion" in the subject line. We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
Stock Market Volatility Makes Retirement Planning ‘Impossible': Study
- National Institute on Retirement Security:
Pensions and Retirement Security 2011: A Roadmap for Policy Makers
Raising The Retirement Age: Can It Balance Budgets?
- Money Morning News Archive:
Question of the Week Feature