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[Commentary] © 2003 Philip Hyde, The Timesizing Wire™, Box 622 Cambridge MA 02143 USA (617) 623-8080

Eroding Retirement, April/2003


4/23/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times -

  1. How to protect yourself from your parents - Strapped retirees turn to kids for financial aid..., by Michelle Higgins, WSJ, D1.
    After spending years saving for a comfortable retirement, many people are running into a cost they never planned for - their parent's retirement. In the latest sign of tough economic times [and a mean spirit among taxpayers and voters!], a growing number of families are undergoing a role reversal. Instead of getting financial help from their parents, children are having to give them regular handouts. Some are shelling out tens of thousands of dollars to cover basic costs, from medical and credit-card bills to vacation and retirement-home expenses....
    Role reversal, blowout, WSJ, D1.
    Sure, your parents used to house you and buy your school magazines. Here are some ways you can help them without hurting yourself. [The richest country in the world? Hah! No nation that's become as mean-spirited as the USA under the "conservative" talkshow hosts and administration Republicans is rich. It's a wasteland of wrecked lives.]

  2. Why it pays to delay: Too many retirees start collecting social security early, by Jonathan Clements, WSJ, D1.
    [The insulated and isolated wealth-oriented scribblers at the Wall Street Journal are apparently under the illusion that people have a choice.]
    Maybe wisdom doesn't come with age. In recent years, almost 70% of retirees took Social Security before age 65, thus accepting a permanent reduction in their monthly benefits.
    [But getting some of what they put into it back, up to three years earlier, at an age when they could keel over at any moment.]
    But this doesn't make any sense at all, especially with folks living longer and longer.
    [Unless, as mentioned in the article right above (which maybe Jonathan Clements should read), "tough economic times" leave you with absolutely no choice. Has Clements heard much about a preference for hiring older people lately? Has he heard of any reverse agism in the last few years? Clements makes all kinds of noises about how mysterious it is that people apply for their Social Security benefits as early as possible -]
    ...Applying for benefits at 62 meant accepting a hefty 20% cut in months benefits.... By 1970, 40.3% of men and 57.3% of women claiming SS were under age 65.... Given their greater life expectancy..\..why did women jump at the chance to take their SS benefits early? It's hard to fathom.... That isn't the only mystery, however. It turns out that the percentage of retirees claiming benefits early has climbed sharply since 1970. In 2001, [it was] 65.6% of men and 69.9% of women. Yet logic suggests that these percentages should be falling, not rising [because] over this 31-year stretch, the average life expectancy for 65-year-old men climbed [we'd say crawled up] 2.7 years [and for women] 1.1 years.
    [Big deal. This guy obviously hasn't been reading the newspapers in the last few years either, because he seems to have heard nothing about deteriorating company pension plans, which used to give people more choice. Also, there's all the talk about SS going bankrupt, and all the irresponsibility among politicians today. People figure, "I better take as much as I can as soon as I can before these thieves bankrupt the whole system!" Plus, as Clements quotes someone saying later -]
    ...Says Henry Hebeler...founder of a website devoted to retirement issues (*AnalyzeNow.com), "...It's the only income they have that's adjusted every year for inflation."
    [What it boils down to is a huge leap of faith -]
    ...Thomas Walsh, a research fellow at New York's TIAA-CREF Institute...conclu[des]: It is worth delaying until age 65½ if you believe you will live until at least age 84....
    [And who the hell believes that with any confidence? And even if you believe it, it's NOW that you're relatively healthy and can get around and enjoy things. God knows WHAT shape you'll be in by the time you're 84 - if you're lucky (or unlucky?!) enough to last that long! Our conclusion: Clements is an idiot. The WSJ should get somebody else, somebody who's been there, to write retirement advice - but they probably wouldn't hire somebody that old. Here's more of Clements' cluelessness -]
    If your finances are shaky, however, you probably shouldn't be retiring at all.
    [As if everyone has that choice in this economy where CEOs go after you with pink slips just before you reach retirement age so they don't have the expense of your pension. Clements talks like an ignoramus. And so does Hebeler -]
    "You've got a 50% chance of living longer than average.... If you want to live a drab, drab life, try to live those later years on reduced Social Security benefits."
    [Well, duh, try to live an exciting active, non-drab life when you're confined to a wheelchair or a bed or a nursing home! Have these shmucks visited a nursing home lately??? It's one thing to be 94 and John Kenneth Galbraith in his lovely home on Francis Street in Cambridge MA, or 98 and Ernst Mayr in his very nice retirement community in Lexington MA, but go out Mass. Ave to the home just this side of TJ's and check out some of the live wires you see there, or take a left at the previous light and scope Park Avenue Rehab.]

4/18/2003   eroding retirement for employees, secure retirement for senior executives - 4/17/2003   eroding retirement -
  1. A study of corporate pension funds shows many assumed outsized gains, by Mary Walsh, NYT, C1.
    The first comprehensive examination of the pension funds of the nation's biggest corporations shows that nearly half made assumptions about their investment returns for 2002 that would be deemed too aggressive by federal regulators, starting this year.... The optimistic assumptions about returns on fund investments translated into billions of dollars for corporate America'ss collective bottom line in 2002, according to the study, by the actuarial firm of Milliman USA..\.. In fact...almost all the pension funds examined lost money last year. The companies that used the highest estimates included Northwest Airlines, General Motors and Honeywell International.... "I've had more questions on the assumed rate of return in the last 6 months than I had for 15 years before that," said John Ehrhardt, a consulting actuary and principal of Milliman and author of the new study, [which] showed that America's biggest companies last year assumed an average rate of return of 8.92% for their pension investments....
    [Headline - "A wave of brain rot sweeps America's CEOs.']

  2. Pension shortfalls force companies to make choices - At an increasing rate, cash for growth is used to boost sagging funds, by Cassell Bryan-Low, WSJ, C3.
    Companies in the S&P's 500-stock index poured $46B into their pension plans last year, 3 times more than the year earlier, according to a new study by Credit Suisse First Boston [CSFB].
    [This is the first story we've seen that indicates companies are doing anything but looting and dumping their pension funds.]
    Thanks to continuing stock-market declines that have shrunk pension assets, S&P-500 companies could spend as much again this year to top up pension plans, which provide guaranteed benefits to retired workers, according to David Zion, the report's author.... According to the CSFB study, which looks at the 360 S&P-500 companies that have pension plans [so 140, 28% DON'T?!], the $46B of 2002 contributions represented 6% of the total cashflow from operations. For 10 companies, the amount spent represented 40% or more of operating cashflow.... Among companies that experienced the biggest dollar drops in the funding of their plans were each of which saw declines of more than $10B..\.. When companies are obligated by federal pension rules to make contributions, they are allowed to do so incrementally, over 3-5 years. But topping up plans voluntarily is attractive for a variety of reasons, including tax ones....

4/13/2003   eroding retirement - 4/05/2003   eroding retirement - 4/4/2003   eroding retirement -
  1. Goodyear Tire & Rubber plans heavy cost cuts after it posted a record loss, by Timothy Aeppel, WSJ, A6.
    ...CEO Robert Keegan said previous moves - such as laying off 900 workers at a plant in Tennessee and 700 mostly white-collar workers at its base in Akron, Ohio, axing employer contributions to 401k retirement plans, and halting dividend payments - are just a "first phase" in the cost cutting. "We have to take our cost structure down and attack it in a way we historically haven't done in North America," he said....
    [Too bad he's also attacking his own best markets = his own employees, who are his own and his customers' customers. The crude narrow interests and near-sightedness of many of today's CEOs is still thinking, when they think of it at all, that the consumer base is infinite and that nothing "little them" can do to it will harm it. It's like fishermen, or polluters, think of the oceans - "Oh, they're infinite. Fish stocks will never give out. Pollutants will never build up." Or in the CEOs' case, "The consumer base will never give out." Ri-i-ight. Fasten your seatbelts for the Mother of All Depressions.]

  2. [and it's not only here -]
    Protest strike in France interrupts travel - Workers are upset at the government's intentions to revamp their pension plans, by John Tagliabue, NYT, A6.

4/03/2003   eroding retirement -

For earlier retirement stories, click on the desired date -

  • March, 2003.
  • Jan-Feb, 2003.
  • Oct-Dec, 2002.
  • July-Sept, 2002.
  • June, 2002 & previous.
    For more details, see our laypersons' guide Timesizing, Not Downsizing, which is available online from *Amazon.com and at bookstores in Harvard and Porter Squares, Cambridge, Mass.

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