Alicia Munnell
economist
Think about the people you know who are retired. Many of them are probably doing fairly well -- staying in their homes, moving to attractive retirement facilities, maybe even traveling or giving to charity.
They're an inspiration -- and they may be the last of their kind. Economic forces at work in the United States mean most of tomorrow's retirees will work longer and get by on less.
That's the "gloomy story" that Alicia Munnell tells. Munnell, a professor of economics at Boston College, specializes in researching economic forces affecting retirement.
"Economic forces are not going to be favorable to people who are retiring early," Munnell says. The traditional sources of retirement income that today's retirees are using are Social Security and pensions. Both of those sources are going to diminish sharply in the next few years.
Under current law, Social Security will provide less in the future, partly by increasing the age at which one can claim full benefits. People who turned 50 in 2006 will have to wait till they're 66 years and 4 months old before they can claim full benefits; those born in 1960 or after will have to wait till they're 67.
In addition, Medicare premiums, which are deducted from Social Security, are skyrocketing, and taxes may start taking more of a bite as payments rise.
This pinch is most crucial for the middle to bottom third of the income ladder. Munnell notes that two-thirds of Americans approaching retirement age have something besides Social Security, often a pension of the sort that has increasingly disappeared from corporate benefit plans.
Workers are increasingly being offered only a 401(k) savings plan. Munnell holds out little hope that individual savings will help fill the gap. "People basically do not save on their own. The new plans shift all responsibility from the employer to the individual. Individuals are just ill-suited to this ... . It's too hard, people make mistakes."
In some government and other circles, there's a move to make it easier for workers to save into their 401(k) plans - perhaps by automatically signing up new employees, requiring them to make a choice to opt out of the plan. Still, Munnell doubts that such plans will ever produce really substantial retirement assets. "I don't think 401(k)s will ever be really adequate."
Instead, she suggests, most of us will just work longer. "That's a powerful offset to a declining retirement income system." Her next book will look at continuing employment of older workers.
At the same time, many retirees will find themselves at risk, particularly if they suffer health problems. Eventually, Munnell suggests, "we as a country will say this is really too little... . That's not where we are now, though."
Munnell is 63 now, and plans to practice what she preaches. "I think of retiring when I'm 70. But I'll still have an opinion on everything."
