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. Pinellas construction licensing board needs to be fixed. But how?

    Local Government

    LARGO –– Everyone agrees that the Pinellas County Construction Licensing Board needs to be reformed. But no one agrees on how to do it.

    Rodney Fischer, former executive director of the Pinellas County Construction Licensing Board Rodney, at a February meeting. His management of the agency was criticized by an inspector general's report. [SCOTT KEELER   |   Times]

  2. New owners take over downtown St. Petersburg's Hofbräuhaus

    Retail

    ST. PETERSBURG — The downtown German beer-hall Hofbräuhaus St. Petersburg has been bought by a partnership led by former Checkers Drive-In Restaurants president Keith Sirois.

    The Hofbrauhaus, St. Petersburg, located in the former historic Tramor Cafeteria, St. Petersburg, is under new ownership.
[SCOTT KEELER  |  TIMES]

  3. Boho Hunter will target fashions in Hyde Park

    Business

    Boho Hunter, a boutique based in Miami's Wynwood District, will expand into Tampa with its very first franchise.

    Palma Canaria bags will be among the featured items at Boho Hunter when it opens in October. Photo courtesy of Boho Hunter.
  4. Gallery now bringing useful art to Hyde Park customers

    Business

    HYDE PARK — In 1998, Mike and Sue Shapiro opened a gallery in St. Petersburg along Central Ave., with a majority of the space dedicated to Sue's clay studio.

     As Sue Shapiro continued to work on her pottery in St. Petersburg, her retail space grew and her studio shrunk. Now Shapiro's is bringing wares like these to Hyde Park Village. Photo courtesy of Shapiro's.
  5. Appointments at Raymond James Bank and Saint Leo University highlight this week's Tampa Bay business Movers & Shakers

    Business

    Banking

    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. Jackson will oversee all of Raymond James Bank's operational business elements, risk management and strategic planning functions. Kackson joins Raymond James Bank after senior …

    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. [Company handout]