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When I'm Sixty-Four

When I'm Sixty-Four: The Plot against Pensions and the Plan to Save Them

Teresa Ghilarducci
Copyright Date: 2008
Pages: 384
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  • Book Info
    When I'm Sixty-Four
    Book Description:

    A crisis is looming for baby boomers and anyone else who hopes to retire in the coming years. InWhen I'm Sixty-Four, Teresa Ghilarducci, the nation's leading authority on the economics of retirement, explains how to confront this crisis head-on, revealing the causes behind the increasingly precarious economics of old age in America and proposing a bold plan to guarantee retirement security for every working citizen.

    Retirement is one of the hallmarks of a prosperous, civilized market economy. Yet in America today Social Security is on the ropes. Government and employers are dismantling pension security, forcing older people to work longer. The federal government spends billions in exemptions for 401(k)s and other voluntary retirement accounts, yet retirement savings for most workers is falling. Ghilarducci takes an unflinching look at the eroding economic structure of retirement in America--and what she finds is alarming. She exposes the failures of pension regulators and the false hopes of privatized Social Security. She tells the ugly truth about risky 401(k) plans, do-it-yourself retirement schemes, and companies like Enron that have left employees without any retirement savings. Ghilarducci puts forward a sweeping plan to revive the retirement-income system, a plan that will ensure that, after forty years of work, every American will receive 70 percent of their preretirement earnings, guaranteed for life. No other book makes such a persuasive case for overhauling the pension and Social Security system in order to provide older Americans with the financial stability they have earned and deserve.

    eISBN: 978-1-4008-2438-0
    Subjects: Political Science, Finance, Law

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-x)
  3. Introduction
    (pp. 1-4)

    In the mid-1960s, when the first wave of American baby boomers—the 76 million people born between 1946 and 1962—tripled college enrollments and Medicare legislation was adopted, the Beatles’ song “When I’m Sixty-Four,” could not, in retrospect, have been more forward-looking.

    Since the first Social Security check was sent sixty years ago, Americans losing their hair have been receiving “pension valentines.” Today, as the Beatles’ first fans are approaching age sixty-four, American workers wonder if the promised pensions, Social Security, and medical care, will materialize in their old age.

    In the face of a crumbling pension system, a badly...

  4. Part I The Attack on Retirement

    • Chapter 1 Hope for Retirement’s Future
      (pp. 7-25)

      Until the 1950s, only the wealthy could expect to retire. In 1951, less than 5% of men said they retired because they wanted to rest and have some time off, and these were the men with the highest incomes.¹ In that same year, over half of older men were working and most of the others were unemployed or unemployable. Today, over 60% of older Americans, not working, actually chose to retire because they prefer free time to paid work. Making retirement available to almost all workers, that is, “democratizing” retirement, is one of the greatest achievements of robust market economies....

    • Chapter 2 The Collapse of Retirement Income
      (pp. 26-57)

      Retirement income is falling.

      It is less secure.

      And it is distributed more unevenly across income, class, and gender lines.

      What is the inevitable result? For most of the elderly, the material standard of living will fall when they are retired because their retirement income will replace much less of their pre-retirement income. To maintain their standard of living when they do retire, the elderly will likely delay retirement, continue working if possible, or look for work.

      This chapter begins by considering retirement income needs, the sources of retirement income, and what is predicted to happen to retirement income in...

    • Chapter 3 When Bad Things Happen to Good Pensions—Promises Get Broken
      (pp. 58-115)

      “I feel like I was kicked in the stomach.”

      That’s what a salaried Verizon Communications employee said to a reporter in December 2005 when her company announced it was freezing its defined benefit pension plan. Her defined benefit pension benefit, as is the case for most DB plans, was based on salary at the time of retirement and total years of service. But, since Verizon froze the plan, she will not earn any more years of service credits and her pension will be based on her salary at the time the plan was frozen, not the higher salary at the...

    • Chapter 4 Do-It-Yourself Pensions
      (pp. 116-138)

      Pension coverage is stagnating while the share of employees with a defined contribution savings plan is growing. (Defined contribution plans include 401(k) plans [about 80% of participants in DC plans are in 401(k) plans]; profit sharing plans; money purchase plans; individual retirement accounts; and 403(b) plans, which are 401(k) plans for employees in the public sector.) That paradox is explained largely by DC plans replacing traditional DB plans. The disappointing lack of growth in pension coverage (discussed and documented in chapter 3) is not the only consequence of the shift from DB to DC pensions. Other consequences include

      inefficiency (the...

    • Chapter 5 The Future of Social Security
      (pp. 139-178)

      Who should pay for the old? How should we pay for the old? Should the old work to help pay for themselves?

      These questions are not new for governments, but they persist and are becoming increasingly part of public discussion. Just one indication of the growing concern is the media’s interest. I used the newspaper search engine LexisNexis to count the number of times the phrase “old-age crisis” appeared in the headline or lead paragraph of major papers. In the five years between 1990 and 1995 it appeared 73 times, between 2000 and 2005, 170 times. Modern industrialized societies expect...

  5. Part II What Is Good about America’s Retirement Income Security System

    • Chapter 6 The Short History of Old Age Leisure in America
      (pp. 181-196)

      American workers are spending more time in retirement today than they did thirty years ago. But that has started to change. The amount of retirement time is beginning to shrink.

      This chapter reviews the evolution of retirement in the United States and how retirement is changing. Policymakers and pundits say Americans should work more. They argue that working more is a win-win solution to rising Medicare and Social Security costs and to the upward pressure on wages caused by so-called future labor shortages.

      But working more is not a win-win solution. There are losers. The losers are the people who...

    • Chapter 7 The Distribution of Retirement Time: Who Really Gets to Retire?
      (pp. 197-216)

      Yes, the average American is retiring earlier and living longer. However, these two facts do not mean that people are spending more time in retirement. Jumping to that conclusion means assuming that longevity is going up faster than the retirement age is decreasing for everyone. We do not know that. Besides, only some people are living longer and only some people are working more. Stunningly, no one has considered that the reason we are living longer is precisely that we are retiring at earlier ages. There is credible evidence that retirement improves health, and evidence that working more would reverse...

    • Chapter 8 Working: The New Retirement’s Effect on the Economy
      (pp. 217-234)

      An online marketing company serving “today’s dynamic population of leading edge Baby Boomers and over 40 set” concluded, “Most 40+ still plan to work in some capacity after retirement. This is especially true for skilled workers with higher education … they conitnue to work for personal fulfillment.” Yet according to that marketing company’s survey, being fulfilled at work is not widespread; only 35% of forty- to fifty-four-year-olds and 44% of workers over age sixty-five find their jobs rewarding.¹ Similarly, 55% of older employees say they are postponing retirement because they find their jobs interesting. In contrast, 75% report “not having...

  6. Part III The Rescue Plan for Retirement

    • Chapter 9 The American Labor Movement: Advocating Retirement and Obtaining Pensions
      (pp. 237-259)

      Pensions did not spring forth from the brains of employers as Athena sprung forth from Zeus’s head (but that was only because Prometheus took a rock and split open Zeus’s head to relieve him of his headache!). Employers did not start out providing pensions to their rank-and-file employees until unions in a Promethean move—civilizing humankind by taking privileges once reserved by the gods—demanded that all working persons were entitled to a pension shortly after World War I. Pensions were, up to that point, a benefit reserved for management.

      The American labor movement promotes employment-based pension plans and continues...

    • Chapter 10 Rescue Plan for American Workers’ Retirement: Averting the End of Retirement
      (pp. 260-294)

      Retirement with dignity and security after a lifetime of hard work is a cherished feature of a civilized society. To whatever extent and for whom it may have been possible, the ability to retire with adequate income is lessening in the United States. It is lessening because of a badly functioning system of retirement income security. That disquiet was expressed in the first chapter of this book and is the concern woven throughout all the following chapters as well.

      The overall system of retirement is faltering not because Social Security, as the pillar of retirement income for Americans, replaces only...

  7. Notes
    (pp. 295-330)
  8. Glossary
    (pp. 331-340)
  9. Bibliography
    (pp. 341-364)
  10. Acknowledgments
    (pp. 365-366)
  11. Index
    (pp. 367-374)