Will you wed work till death do you part?

Some 45 per­cent of Amer­i­cans have zero saved for retirement, ac­cord­ing to the Na­tional In­sti­tute on Retirement Se­cu­rity. Why would that be?

The Day - - OPINION - FROMA HARROP Cre­ators Syn­di­cate

Many Amer­i­cans now face retirement, hearts full of dreams, bank ac­counts full of noth­ing. For them, those Wall Street ads show­ing sil­ver-haired cou­ples sail­ing warm blue seas may seem as­pi­ra­tions beyond their grasp. In­stead, they may find them­selves the 72-year-old hired to drive the plat­inum cou­ple from the air­port to the docks.

Some 45 per­cent of Amer­i­cans have zero saved for retirement, ac­cord­ing to the Na­tional In­sti­tute on Retirement Se­cu­rity. Why would that be?

The rea­sons are di­verse. The prob­lem may be stag­nat­ing wages, an ex­pen­sive med­i­cal cri­sis or di­vorce that chopped house­hold in­come in half. Or while col­lect­ing pay­checks, they didn’t save enough, in­vested un­wisely and spent too much on va­ca­tions, cars and pricey lux­u­ries.

A big rea­son is the near dis­ap­pear­ance of the tra­di­tional pen­sion plan. It made sav­ing for retirement a no-brainer. Em­ploy­ees didn’t have to de­cide how much, if any, of their pay­check to set aside. They didn’t do the in­vest­ing. The com­pany did it all. On retirement, for­mer em­ploy­ees would be sent a pen­sion check ev­ery month, pos­si­bly for the rest of their lives.

The 401(k) plan has taken its place. This is a deal whereby work­ers elect to move a cer­tain amount out of their pay­checks ev­ery week and into a retirement ac­count. Par­tic­i­pants usu­ally have a say in how the money is in­vested. And the 401(k) is a deal — even though in­vest­ment com­pa­nies of­ten take a too-big chunk in fees. The em­ployer may match some of the con­tri­bu­tions. And the earn­ings de­posited in the 401(k) are not taxed. You pay taxes only when you re­tire and with­draw the funds.

Though 80 per­cent of work­ers have ac­cess to a 401(k), only 61 per­cent put any­thing in. And many who do vastly un­der­es­ti­mate what they’ll need and con­trib­ute far too lit­tle.

Whether they have other sav­ings or not, Amer­i­cans know that So­cial Se­cu­rity is there as a back­stop. (Don’t let any­one tell you the pro­gram is go­ing down.) So­cial Se­cu­rity is beau­ti­fully sim­ple, but even here, peo­ple make mis­takes. For one, they start col­lect­ing ben­e­fits too early. Con­sider the 61-year-old en­ti­tled to $1,000 a month at the full retirement age of 66. If that per­son starts col­lect­ing early at 62, the monthly check drops to $750. By wait­ing un­til age 70, the ben­e­fit jumps to $1,350. The dif­fer­ence between dip­ping in early and late is, start­ing at 70, $600 a month for the rest of one’s life.

In a re­cent poll of Amer­i­cans over age 50, 4 in 10 said they plan to start col­lect­ing So­cial Se­cu­rity ben­e­fits early. Less than 9 per­cent said they’ll hold off un­til 70.

On the spend­ing and bor­row­ing side, the hous­ing bub­ble of the 2000s fos­tered some bad habits. As real es­tate val­ues rose, peo­ple started see­ing their home as the pot of gold fund­ing their retirement. They fig­ured they didn’t need other sav­ings.

Many also started treat­ing their homes like piggy banks. As home prices rose, they re­fi­nanced their mort­gages, bor­row­ing more so they could take cash out for what­ever. Home eq­uity loans were an­other means of do­ing that. Mine came with a check­book, mean­ing I could pay the elec­tric bill by re­duc­ing my home eq­uity (the part of the house that I, not the bank, owned).

To­ward the end of last decade, the bub­ble popped, and for many, the magic money van­ished.

Savvy Amer­i­cans with high net worth seem quite able to guar­an­tee clear sail­ing in retirement. Oth­ers who don’t plan, can’t plan or are in too des­per­ate straits to put any­thing aside may end up work­ing for the rest of their lives. That pre­sup­poses they can work. What if they can’t?

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