'I think I'm never going to be able to retire' - Many see grim future as they're forced to tap into savings

'I think I'm never going to be able to retire' - Many see grim future as they're forced to tap into savings
BY FRANCINE KNOWLES fknowles@suntimes.com
Copyright by The Chicago Sun-Times
September 6, 2010
http://www.suntimes.com/business/currency/2678838,CST-NWS-Labor06.article


Debby Rabeor's husband cut his 401(k) contributions in half, and she hasn't contributed to retirement savings in more than a year. The Chicago couple can't afford to do more -- Rabeor has been out of work for 13 months.

Edgar Roman has borrowed twice from his 401(k) plan, and his wife's retirement savings have been drained. They had to take the steps to help pay the mortgage on their Franklin Park home after his wife lost her job. She landed another, but it's at a third of her previous pay.

Larry McShane, who had been receiving an employee match in his retirement plan, lost that when he was laid off from his job as a paralegal in Waukegan -- and lost his ability to save now for retirement. Now, in his 50s, he's concerned that when he gets a new job, he won't get the same benefit, even though he'll need it even more.

This Labor Day, they are among the growing number of Americans who've slashed their retirement savings and who worry more about their future retirement security, another unwelcome byproduct of the recession.

"Things weren't great before the recession," said Nancy Hwa, communications director for the Pension Rights Center, noting that many Americans weren't on track for a secure retirement before the bottom fell out of the economy. "The recession worsened things."

To start, half the U.S. working population does not have a 401(k) plan or traditional pension. Many employers have halted 401(k) matches. Workers are still reeling from recent stock market tailspins, and for many workers enrolled in public pension plans, underfunding is a major problem. (Some public pension plans in Illinois are underfunded by as much as 60 percent to 77 percent.) Others worry about Social Security's solvency. Signs point to a "retirement crisis" underway, a crisis that lawmakers, employers and workers must address, Hwa said.

"I think I'm never going to be able to retire," said 48-year-old Rabeor, who previously worked in public relations for the Chicago Aviation Department. "I really worry about how I'm going to take care of myself when I'm much older. It's frightening."

A survey this year by Illinois AARP of members 50 and older found 21 percent of respondents prematurely withdrew funds from their retirement accounts and 27 percent stopped putting money into them. A national AARP survey found that, of those ages 45 to 64, 14 percent prematurely withdrew funds, and of those over 45, 28 percent stopped contributing to retirement savings in the last six months.

The ramifications of these actions: "It's going to be a greater challenge than ever before" for many to afford to retire, Hwa said.

"There is a large percentage of employees that have had their ability to save impaired," said Jack VanDerhei, research director with the Employee Benefit Research Institute. "Whether that's permanently or only short-term is going to depend on the economy."

Since 2007, when the recession began, the number of workers who are not confident they'll be able to live comfortably throughout their retirement years has spiked 59 percent, hitting 46 percent, according to an annual survey from EBRI and Mathew Greenwald & Associates.

There has been a 39 percent jump in the number of workers who are not confident they'll be able to pay for basic expenses in retirement, the survey showed.

Worries have grown in the wake of pay cuts suffered by existing workers, massive job losses, and as laid-off workers who've landed new jobs have had to take pay cuts leaving them less able to contribute as much to retirement.

Of the 2.2 million displaced workers who lost full-time jobs between January 2007 and December 2009 and were re-employed in full-time jobs this year, 36 percent took pay cuts of 20 percent or more, Federal Labor Department data show. Re-employed workers in Illinois had average pay cuts of 14 percent, 2008 Illinois data show.

Roman, a 40-year-old computer technician with two children, said retirement savings have had to take a back seat to paying the bills. He doesn't see a turnaround soon.

"We thought this crisis was going to be just temporary, but we don't really see the end of this," he said. "Now we are not thinking about retirement. We're just thinking about surviving."




Sources: Federal Reserve and Center for Retirement Research at Boston College
RECESSION'S IMPACT ON RETIREMENT
A survey conducted this year of Illinois AARP members age 50 and older shows the recession has hurt retirement plans and savings. Over the last year:

* 17 percent postponed plans to retire

* 21 percent prematurely withdrew funds from 401(k), IRA or other investments

* 25 percent said they will delay complete retirement and work longer if the economy doesn't improve in the next 12 months

* 27 percent said they stopped funding a 401(k), IRA or other retirement account

* 27 percent said they were extremely or very likely to put off retiring as long as possible

Among those responding to a national AARP survey in June 2010:

* 28 percent of those age 45 and older said they stopped contributing to retirement savings in the last six months

* 14 percent of those 45 to 64 prematurely withdrew funds from retirement savings

* 24 percent of those 45 and older lost a substantial amount of equity in their home's value that they will need for retirement

* 20 percent had their work hours cut, took a pay cut or lost other work income