Nation & World

Millions of baby boomers caught in broken retirement system

'We've probably peaked in terms of retirement security'

Nancy and Terry Koch outside their apartment complex in West Allis, Wisc., earlier this month. Nancy, a retired psychiat
Nancy and Terry Koch outside their apartment complex in West Allis, Wisc., earlier this month. Nancy, a retired psychiatric nurse and Terry a technical writer, are struggling to make ends meet in their retirement. (Washington Post)

They went to work every day and built a life for themselves, put money away in a savings plan and paid their taxes. And then they got divorced or hurt on the job or sick or widowed or just plain unlucky — and found themselves in the same boat as millions of Americans who are now approaching retirement with most of the financial props knocked out from under them.

As the big bulge of baby boomers head into old age, as many as half are coming face to face with a new American economic reality. Retirement means a descent into relative hard times because the systems put in place when this generation was just entering its peak earning years have failed.

And one way or another the whole country will feel the consequences.

The Washington Post spoke with a sampling of Americans who have come to the end of their work lives with no financial cushion, no nest egg.

The oldest is 74, the youngest 57 — just about the exact span of the baby-boom generation. They are liberal and conservative, rural and urban, blue collar and white.

The coronavirus pandemic has scrambled the lives of these six boomers just as it has everyone else’s. Some have hunkered down, as best they can in sometimes tight spaces.

For others, the pandemic has brought a surprising twist to their lives.

For others of their generation who have lost their jobs in the coronavirus shutdown, the odds against regaining employment, and being able to keep saving, have grown longer.

None of these stories is an outlier. Half of American families in the 56-to-61 age bracket had less than $21,000 in retirement savings in 2016, according to a longitudinal study by the Economic Policy Institute that used the most recent available figures.

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A less formal survey last year found that little had changed. Forty percent of Americans over the age of 60 who are no longer working full-time rely solely on Social Security for their income — the median annual benefit is about $17,000.

Every day, 10,000 Americans reach the age of 65. In 2024, that number will crest at about 12,000 a day.

And every year, fewer of them have traditional employer-sponsored pensions to support them.

“We’ve probably peaked in terms of retirement security — and it’s not great,” said Monique Morrisey, of the Economic Policy Institute. “And now it’s all downhill. Unless something changes, we’re going to start seeing much more hardship.”

For laid-off workers in their 50s, 60s and 70s, finding employment again will be tough.

The impact will reach far beyond the more than 70 million living members of the baby-boom generation. It will affect everything from employment patterns to the price of real estate.

With life spans lengthening, in concert with medical bills, financially strapped baby boomers entering the years of serious physical decline will put an immense burden down the road on Medicaid and on their families.

“Their children are looking around and wondering what this means for them,” said Jan Mutchler of University of Massachusetts at Boston.

“It will be felt down the family chain,” said Alicia Munnell, a professor of management sciences at Boston College. “People are going to be anxious. There’s going to be some intergenerational ripple.”

Unprepared

By some comparisons, Nancy Koch, a 70-year-old retired psychiatric nurse, counts herself lucky. She had some good jobs over the years.

She’s married — for the third time, after two divorces, each of which involved lawyers, the need to set up new households, and a general drain on savings.

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Her husband, Terry Koch, 69, was a technical writer who worked most recently for a company that makes labels. He’s the improviser; she’s the organizer.

She has recovered better than expected from a health scare a decade ago, when back surgery led to unexpected complications. They have an apartment in West Allis, Wisc., in a senior living complex that is subsidized through the federal Low Income Housing Tax Credit.

What they don’t have is any money.

“We were completely not prepared,” she said, for the life they are now living.

A sizable minority of Americans have struggled all their lives with low incomes. But now, millions more who were solidly middle class — like the Kochs — are looking at a financial fall.

Half of Americans are at risk of not being able to maintain their standard of living in retirement, according to a Boston College study that was completed before the pandemic hit and potentially made the prospects even worse.

Dozens of factors have contributed to this, most having to do with lack of access to retirement savings plans, unexpected large financial hits, layoffs and declines in health.

A study at Stanford University found the baby boomers have, in real terms, about 20 percent less in savings, 20 percent lower household wealth and 100 percent more debt than the generation born during World War II.

Terry and Nancy Koch are part of that 40 percent of retired Americans who have Social Security as their only income. Between them, it comes to about $2,500 a month.

Rent for their subsidized two-bedroom apartment, across the street from an abandoned bowling alley, is $975, plus a $20 pet fee for their cat, Sam. The rent is about to go up by $30.

Premiums for Medicare and supplemental insurance policies cost about $450 a month for the two of them. Beyond Social Security, their retirement savings plans are totally tapped out.

Although they are above the official poverty line, their monthly income falls $750 short of the amount that “constitutes adequacy as opposed to destitution” for Milwaukee county, said Mutchler, whose team at the Center for Social and Demographic Research on Aging has calculated an “Elder Index” for every county in the nation.

While reflecting on their lives, Nancy said, “We never saved a lot of money because there wasn’t any to save.”

Terry had an operation for kidney stones and was handed a bill for $50,000, he said. “Are you kidding me? I told them I wasn’t going to pay them,” he said.”

Eventually, he said, the hospital gave up.

He managed to get his student loans suspended; Nancy’s were forgiven because she went into nursing, but she had to count the outstanding balance as income, and pay taxes on it.

As early as he could — when he turned 62 in 2012 — Terry Koch began taking Social Security.

There’s a cost to that: his benefit is just under $1,000 a month.

If he could have waited until he was older, he’d be getting considerably more because the benefit increases 6.75 percent for every year that it is deferred, up to age 70.

Most Americans do not wait that long. The average Social Security benefit is about $1,461 a month.

Nancy has tried to go back to work.

“I’m looking, but nobody wants a 70-year-old,” she said. “I’ve applied for a zillion jobs. It’s completely impersonal.”

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Last year she had a temporary, part-time job at the local public television station arranging its annual auction, and when it ended she was able to collect some unemployment insurance, but that’s over now.

Pushed out

More people in their 60s are, like Nancy, staying at work or trying to return to the workforce.

Economists argue over the impact this has on younger workers — whether it suppresses wages for all, or blocks chances for advancement or strengthens the economy.

But only about one-quarter of employed Americans work continuously through their 50s and their early 60s in jobs with benefits, according to a study by the Center for Retirement Research at Boston College.

“It was surprising bad news,” said Munnell, who conducted the study.

Many older workers are being pushed out of jobs, with benefits, and taking whatever they can find. Or were before the coronavirus hit.

In 2019, the number of employed Americans over the age of 65 grew by more than 700,000, to 10.6 million.

That accounted for 36 percent of the country’s job growth.

But COVID-19 could halt that trend.

“If older workers can’t work in high-contact areas,” said Teresa Ghilarducci, who studies aging and employment issues at the New School University in New York, “employers will have to make accommodations for them.”

That’s an expense. They’ll have to accept worse working conditions or lower pay — or see those jobs go to younger people, she said.

“We’re going to see a lot of disruption — political and economic,” Ghilarducci said. “There is nothing that will slow down the desperation of older workers.”

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People in their 50s and 60s have come to be seen as more vulnerable because of the disease, Munnell said, and those who have lost their jobs this spring will be less attractive to potential employers.

“It has just made the prospects more dismal,” she said. “I think they’re going to have a harder time re-entering.”

With COVID-19, the Kochs’ lives have contracted even further. Terry has chronic obstructive pulmonary disease, so he has barely left the apartment.

They watched incredulously as protesters demonstrated against Wisconsin’s shutdown orders.

Yet they are remarkably good-humored about their predicament. They are, after all, children of the post-war generation, raised in an era of growing prosperity and ever-higher expectations.

And some of the irreverence that marked the 1960s refuses to be stamped out.

“You know, frankly, neither of us thought we’d be alive at this age,” Nancy said.

Actuaries have a term for that — longevity risk. In other words, there’s a risk that you’ll live too long.

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