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Golden Years Tainted As Retirement Savings Dwindle

Michael and Katharine Powers don't expect to be able to retire. Here, they are with two of their daughters and Michael's grandfather.
Courtesy of the Powers family
Michael and Katharine Powers don't expect to be able to retire. Here, they are with two of their daughters and Michael's grandfather.

"I'm a carpenter/cabinet-maker/woodworker, and I think I'll be retiring the day I die."

Michael Powers, 47, is not alone in his retirement insecurity. According to a Pew study published in May, members of Generation X — aged 38 to 47 — are on track to be the first generation to do worse in retirement than their parents. Assuming they retire at all.

For almost a century, it's been a tenet of the American dream: Work hard enough, and you'll get to rest and relax in your golden years. But retirement as we know it may be consigned to the dustbin of history.

Getting By

Powers lives in Washoe Valley, Nev., with his wife, Katharine. At 46, she manages an office suites company. The Powers have three children, and like many people of their generation, they didn't even start saving for retirement until well into their 30s.

"We moved back and forth quite a lot, and didn't really save a whole bunch. We did start saving probably only about 15 years ago," Michael Powers tells Tess Vigeland, guest host of weekends on All Things Considered. "I had a profit-sharing with the construction company that I used to work for, but that's all gone now."

In 2007, business was booming. The housing bubble kept him busy, and the couple was able to save. They'd put away more than $15,000, but then the crash came.

"We lost a whole bunch of the money ... and we even at one point had to take some out because it was getting really bad there for a while," Katharine Powers says.

The worst year was 2009, after Michael Powers lost his job. They used their small retirement fund for daily living expenses. He says things are better now, but it's still tough to make ends meet. He had been making about $100,000 a year. Last year, they made $30,000.

"We're not poor. We're very thrifty," he says. "But there's no retirement, not a lot of extras happening."

Of that $15,000 they'd saved before the recession, only a few hundred dollars remain.

Taking A Hit

"Gen. X looks to be the first generation that will not exceed the wealth of the group that came before them, and to potentially face downward mobility in retirement," says Erin Currier, director of economic mobility for the Pew Charitable Trusts.

The Pew study compared Generation X to previous generations, like the baby boomers (ages 48-65). The study looks at "replacement rates," how much of people's pre-retirement income they can replace with savings.

Wealth managers recommend having enough to replace 70 to 100 percent of your income when you retire. Here's the study's replacement rate breakdown:

  • Early boomer: 70 to 80 percent
  • Late boomer: about 60 percent
  • Generation Xer: about 50 percent
  • Currier says the recession took a particular hard toll on Generation X.

    "They lost the highest percentage of net worth than the other groups, losing an average of $33,000 in their net worth," she says.

    But Currier says there were signs even before the recession that Generation X would not exceed the wealth of the previous generation. Contributing to their insecurity are big student loans and wages that haven't kept up with the cost of living.

    Counting On The System

    The retirement system itself could also be a factor in how — or if — this generation is saving. A dominant savings vehicle for Americans under 50 is the 401(k).

    But fewer than half of Americans have access to a 401(k) plan through their employer, Currier says, "and a very small percentage of them try to get retirement plans on their own through an IRA."

    With a 401(k), workers are allowed — but not required — to invest their own money, rather than having the company automatically set aside and manage a pension for you. In theory, it gives you freedom.

    "Our experiment with the do-it-yourself, individual-directed, commercially provided 401(k) plan has not worked," says Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School. "It's an abysmal failure in almost every way, and almost all experts agree that something has to change."

    Her suggestion is to "go back to the basics."

    "Make sure that people save where they can save — and that's at the workplace," she says. The further along you are in your career, she says, the more you'll have to save.

    Yet Ghilarducci realizes it's difficult to ask people to put aside their own wages, particularly if where they are putting that money isn't secure.

    "There has to be new institutions that guarantee a modest but safe continual rate of return," she says. "And we can do that by adding to the Social Security system, a place where people can save their money and get a rate of return that's safe."

    She notes that a number of states are trying to find ways that residents can save money through the public employees' retirement systems.

    'Most Precious' Period Of Life

    However those initiatives work out, most changes will come too late for people now in their late-30s and 40s. Meaning people like Katharine Powers may have to revise their vision for retirement.

    "We've been married 26 years. It would be nice just go on road trips together, spend time alone together, since we've had a child in the house for over 22 years now," she says.

    Missing out on that part of life isn't just bad for the Powers. Analyst Ghilarducci says it's bad for all of us.

    "After the Great Depression, there was this idea that everybody deserves some time to themselves, to decide what they do with their time. They got the weekend, they got holidays and they got retirement," she says.

    "And to me, that's one of the most precious periods of our life because we're going to die after that period, and we need some time to connect to not only the people that we love, but ... to create a personal narrative about what our life meant."

    But that concept of our golden years increasingly feels like a mirage.

    Copyright 2021 NPR. To see more, visit https://www.npr.org.

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