Make us your home page
Instagram

Baby boomers see savings turn to debt

Saving for retirement early and often is part of the common financial wisdom. But those nest eggs aren't always enough.

Some baby boomers like Dorry Clay, a graphic designer and illustrator, set aside money for decades. Then unexpected costs arose. Clay learned she had cancer and raided her retirement account to cover chemotherapy.

"That wiped out my savings and added new debt," said Clay, 54, of Stonington, Conn., who also lost her job in the 2008 economic crisis. "I expect I'll be working until I am 70 or older because I can't afford to retire."

Others, like Barbara Perrin, 68, of Eugene, Ore., thought they were investing for their futures in other ways. Perrin handled the accounting and marketing for her husband's work as an artist. After a divorce, she saved diligently from her new job and "sank it into the best investment I knew — a house."

"But it is now underwater, and eating away what savings I have left," she said.

Such stories have caught the attention of officials who worry that financially unprepared seniors could become a big drain on state and federal coffers.

With more and more retirees at risk, 17 states are examining simple, low-cost plans that would allow workers to direct pretax money from their paychecks to a retirement account. The plans would be an alternative to the Obama administration's new myRA workplace savings mechanism, which also offers a payroll deduction option for workers.

While the plans would not roll back the clock for baby boomers like Clay or Perrin who are retired or near retirement, they would help the next generation of savers bolster their nest eggs. Clay told a recent Connecticut legislative hearing that the plans were "an absolute no-brainer."

The state proposals, like the federal plan, aim to lower the barriers to savings — such as minimum contributions, fees and investment knowledge. Those have helped stymie savings and contributed to a situation in which more than half of the country's older households are at risk of being unable to afford food, medicine or utilities, according to Boston College's National Retirement Risk Index.

But state-sponsored savings plans face opposition. Local insurance agents, financial planners and bankers argue that savings vehicles already are plentiful, and any new options would only wind up directing savings to financial service behemoths rather than keeping them local.

"So many decide not to participate, or take the money out early," said E. Sven Anderson, an independent financial services agent in Salem, Ore.

Other opponents warn that state involvement will create another budget crisis like those in states with underfunded public employee pension systems — and the state will be liable for any shortages.

Oregon's treasurer, Ted Wheeler, who is overseeing that state's hearings, said the state would consider only plans that involve the state in sponsoring, advertising and overseeing the retirement funds. The funds would then be managed by a private investment company, and have no guaranteed principal or investment gains.

Advocates for the savings plans point to the long-term trends. Corporate pensions are rapidly disappearing, and many people have no access to a 401(k) or other workplace savings plan. And household savings rates are skimpy. More than 38 million people — roughly 45 percent of working-age households — have no retirement savings at all, according to the National Institute on Retirement Security.

"The retirement savings shortfall could have profound impacts on strained state budgets," said Diane Oakley, the institute's executive director. "And Social Security is the largest source of retirement income for most Americans, but it typically provides a fraction of what most people need."

"Retirement savings was once seen as a personal choice," said Wheeler, the Oregon treasurer, "but the reality is that they have become a matter of broader social interest."

Baby boomers see savings turn to debt 07/04/14 [Last modified: Friday, July 4, 2014 8:32pm]
Photo reprints | Article reprints

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Allegiant Air reports $400 million in revenue for second quarter

    Airlines
    Allegiant Air CEO Maurice J. Gallagher Jr. | [Courtesy of Tony Jannus Aviation Society]
  2. As Dow hits new high, Raymond James Financial reports record financial gains

    Banking

    On the same day that the Dow closed at new highs, investment firm Raymond James Financial reported record revenues and earnings for its fiscal third quarter that ended June 30.

    Raymond James Financial CEO Paul Reilly unveiled record quarterly revenues and earnings for the St. Petersburg-based investment firm. [Courtesy of Raymond James Financial]
  3. Florida GDP growth in first quarter 2017 ranks 21st among states, still outpacing U.S.

    Economic Development

    Florida's gross domestic product or GDP rose 1.4 percent in the first quarter, slightly faster than the nation's growth of 1.2 percent and placing Florida 21st among the states for growth rates, according to the U.S. Bureau of Economic Analysis.

    Not too hot. Not too cold.

    These Jackson Square Townhomes began hitting the west Hillsborough County market late last year and continued to be sold into the first quarter of 2017. The real estate sector was the biggest driver of Florida's gross domestic product, which rose 1.4 percent in the first quartrer of 2017.  [JAMES BORCHUCK   |   Times]
  4. A new app will help you find your favorite Tampa Bay food trucks

    Food & Dining

    What's new: Food tech

    Local food businesses are embracing new technologies and partnerships to bring us extra deliciousness.

    Michael Blasco of Tampa Bay Food Trucks says that everyone always asked about an app to help find their favorite food trucks. There is, available for iPhones and Droids.
  5. Another Pinellas foreclosure auction fools bidders, raises questions

    Real Estate

    For the second time in six weeks, a company connected to lawyer Roy C. Skelton stood poised to profit from a Pinellas County foreclosure auction that confused even experienced real estate investors.

    A Palm Harbor company bid  $112,300 for  this Largo townhome at a foreclosure auction July 21 not realizing the auction involved a second mortgage, connected to lawyer and  real estate investor Roy Skelton -- and that the bank could still foreclose on the  first mortgage.
[SUSAN TAYLOR MARTIN   |   Times]