- WASHINGTON -- A number of
factors - including a sobered stock market, deficit pressures, and corporate
cutbacks - may be putting the retirement security of baby boomers at greater
threat than at any time in a quarter century.
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- This week's provocative call by Federal Reserve chairman
Alan Greenspan to scale back future Social Security benefits to help cover
a growing federal budget deficit, is just part of the concern.
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- Evidence is mounting that the other two pillars of retirement
security - private-sector pensions and personal savings - are no longer
adequate to ensure that most Americans will have enough to live on when
then retire.
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- From United Airlines to General Motors Corp., large companies
are struggling to meet their obligations to retirees. The federal plan
that guarantees these pensions is $11.2 billion in the red.
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- And even as the stock market recovers, experts say that
401(k)s and other personal savings aren't nearly big enough.
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- "Tens of millions of Americans are seriously underprepared
to meet their financial needs in retirement," says Benjamin Stein,
of the National Retirement Planning Coalition. As many as 40 percent of
Americans have saved almost nothing for retirement, he told a congressional
panel Wednesday.
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- At the problem's root is a long-term shift that politicians
are reluctant to face: With Americans living longer, the senior population
is growing faster than the number of young workers to cover their needs.
Benefit levels are getting harder to sustain.
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- It's a calculus that is as challenging for corporate
pension plans as it is for Medicare and Social Security programs.
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- The defined retirement benefit, the pension that was
once a standard perk in a big firm, is a rapidly disappearing option for
many Americans. The number of Fortune 100 companies offering a fixed-benefit
pension has dropped from 68 percent in 1998 to 50 percent in 2002, according
to Watson Wyatt Worldwide. And federal data show a steady fall in private-sector
workers who have pensions: from 38 percent in 1980 to 21 percent in 1998.
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- That decline, in part, reflects the trials of old-line
manufacturing industries, airlines, and automakers. Some experts say it
also, ironically, stems from a 1978 law intended to keep pensions from
going belly up, but which added costs and regulation.
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- But if the decline of pensions is important, this week's
talk of changes to Social Security is generating the biggest buzz. Greenspan's
comments set off a flurry of election-year positioning.
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- Both the White House and leading Democratic candidates
quickly distanced themselves from Mr. Greenspan's proposal. Democrats attacked
President Bush for wanting to make his tax cuts permanent at a time of
growing concern about senior entitlements such as Social Security and Medicare.
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- "It is defaulting on our promise to our future retirees
to cut their benefits to make up for the higher deficits caused by massive
tax cuts for the wealthy," says Reps. Charles Rangel (D) of New York,
the ranking Democrat on the House Ways and Means Committee.
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- Even those who criticize Greenspan's comments concede
that serious adjustments will be needed both on Capitol Hill and in individual
saving and spending patterns to prepare for the spike in baby boomer retirements
in the next four years.
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- "He's right that social security does need to be
reformed, but his prescription for cutting benefits for future retirees
is inadvisable," says John Rother, policy director for the senior
lobby AARP.
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- "Half of American workers do not have a pension,
and most have not saved anything significant for retirement," he adds.
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- Given the decline of traditional pensions, this is of
particular concern. Only 15 percent of working age Americans have an individual
retirement account (IRA), and only 22 percent contribute to a 401(k) plan,
according to the Employee Benefit Research Institute. Barely 1 in 3 working
Americans has saved more than $100,000 for retirement.
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- Overall, it means that American retirees will have $45
billion less in retirement income in 2030 than they will need to cover
basic expenses, according to the EBRI.
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- For any politician up for reelection in 2004, the prospect
of large numbers of angry retirees - who vote at higher levels than other
age groups - is unsettling. Social Security reform is an issue rarely engaged
during the political cycle.
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- In 2000, Republican nominee George Bush touched what
analysts call the "third rail" of politics when he proposing
changes in Social Security. With the stock market still seen as strong,
and forecasts for a huge federal surplus, the notion of privatizing a portion
Social Security appealed to many voters, especially those who viewed themselves
as part of a new "investor class." With IRAs and pensions, some
two thirds of voters are directly or indirectly invested in the stock market.
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- But with the sharp reversals in the stock market after
the election and, especially, more recent fears of outsourcing and a jobless
recovery, the average American's stock ownership is shrinking.
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- "We've seen the group of self-identifiers in the
investor class drop from 52 percent a year ago to 32 percent, around October
and November," says pollster John Zogby of Zogby International.
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- Curiously, this group stuck through the worst days of
the bear market in his poll, but more recent publicity about good, white-collar
jobs being shipped overseas has hit this voting group hard. Twenty-one
percent say they are afraid of losing their job in the next 12 months,
says Mr. Zogby.
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- "There are still pockets of acceptability for the
idea of Social Security reform, but what Greenspan said - that your entitlement
is not going to be what you planned - is deadly stuff in politics, especially
as the baby boomers get older," he adds.
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- No one expects Congress or the White House to move on
this issue in an election year, but Friday's's discussion could set markers
for debate beyond 2004.
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- "There are going to be a lot of people looking at
a bad retirement if they get away with cutting Social Security," says
Dean Baker, codirector of the Center for Economic and Policy Research.
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- Copyright © 2004 The Christian Science Monitor.
All rights reserved.
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- http://www.csmonitor.com/2004/0227/p01s01-usec.html
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