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Less bang for the boomers

By Marilyn GardnerStaff writer of The Christian Science Monitor / December 13, 2004

As a Pan Am stewardess in the 1970s and '80s, Cindy Hounsell assumed that her retirement would be secure. Even after the financially troubled airline froze pensions in 1982, she thought, "I have a pension, so I'll be just fine." Recalling her youthful naiveté, she adds, "I didn't know that you needed a lot more savings."

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"A lot more savings." That's the sobering reality dawning on a growing number of current and future retirees as they confront the changing landscape of retirement. Longer life spans, combined with rising healthcare costs and declines in traditional pensions, are creating a gap between dreams and reality.

As a result, many of the 77 million baby boomers - Ms. Hounsell's generation - could face a reduced standard of living in the proverbial golden years.

"People can expect to live one-fourth or one-third of their life in retirement," says Jeffrey Brown, an economist and author of a recent study released by Americans for Secure Retirement. "That requires a lot of planning." The challenge, he explains, is to make a nest egg last a lifetime in the face of uncertainty about how long one will live and what future expenditures will be.

Boomers, in particular, appear at risk because of poor savings habits, faulty planning, and the fading away of pensions.

In the past, many retirees could count on a corporate pension to provide monthly income as long as they lived. Today, as companies shift to 401(k) programs, and as Congress considers privatizing Social Security, workers must increasingly take a do-it-yourself approach to retirement finances. Self-reliance is the new buzzword.

"In the world economy, we've seen whole industries slide into bankruptcy - steel, airlines," says C. William Jones, president of the Association of BellTel Retirees. "This has really transferred responsibility for people's financial future to themselves."

He speaks from experience. In the 14 years since he retired, Mr. Jones has lost about 35 percent of the buying power of his pension. To offset those losses, he returned to work as head of the retirees' association. "Had it not been for that, I certainly would be making a significant change in my standard of living," he says.

Other retirees with reduced pensions are already scaling back. "They stop buying a car every four or five years, and get by rattling around in the old buggy," says Jim Norby, president of the National Retiree Legislative Network, a grass-roots group. More than half of its members are former managers and supervisers.

Women face particular challenges. As they interrupt their careers to care for families, they typically earn less than men. That translates into smaller retirement benefits. "The last generation of women had all their eggs in their spouse's basket," Hounsell says. "Now a lot of women are doing the same thing. They have their second baby and stay home. You don't make up those retirement benefits for the years you don't work."

Just ask Emily Kimball of Richmond, Va., who spent 11 years at home rearing a family. "My Social Security is not that great," she says. Her pension from working for the county is not enough to live on, and she does not want to touch other assets she might need later.

To supplement her income, Mrs. Kimball gives motivational talks about aging creatively. She also takes advantage of opportunities offered free to seniors, such as attending classes at a local university.

For Hounsell, her frozen Pan Am pension became the catalyst for a career change that would bring greater retirement security. She earned a law degree. Now, as executive director of the Women's Institute for a Secure Retirement in Washington, D.C., she is on a mission to help other women get financial information early in their careers so they can make better decisions. Last week she hosted a symposium, "An Uphill Climb for Women: Building Retirement Income Security," which drew 70 participants from women's groups around the country.

"People don't understand that the average Joanne doesn't have a lot of money to save," Hounsell says. Two-thirds of working women earn less than $30,000. "For women in the lower income levels, the only way to fix the problem would be to save 25 percent of their income from early on in life. Obviously nobody can do that."

Among baby boomers, both men and women expect to play catch-up with their savings later in life instead of making regular deposits now, according to a study by The Guardian Life Insurance Company of America. Yet that strategy can be costly.