Dear FRONTLINE,
The program was interesting but left out a very important part of the "Boomer" equasion; most of us own a home and have seen our equity skyrocket in the last few years.
This can amount to a very large nest egg. Many boomers sell their home and downsize. As a former Real Estate agent I would encourage everyone to buy property as part of their retirement plan.
Laura Phillips
Pacifica, CA
Dear FRONTLINE,
We feel very usure of our retirement prospects. We got a late start on our retirement (early thirties) due to divorces. Our ex-spouses got everything. We are now trying to save for our retirement but between student loan repayments and monthly bills, there is very little disposable income to invest in retirement.
At this time, we are going without medical insurance since we can not afford the premiums. We save as much as we can and are currently to a point where we can invest in some short term cds however, because the income to cost of living ratio disallows us from investing in medical insurance, we try to keep our meager savings liquid in order to somehow cover a medical emergency.
A 401(k) would not allow us this flexibilty and access and neither of us has ever worked for a company that offers a pension plan. Most employers do not offer medical insurance because it is too expensive.
In our town, the median income for a family of 4 is $45,000 annually. Whoever assesses cost of living for this area considers "affordable housing" as $236,000 to $286,000. Most families can't afford the 20% down payment on a home and the possibiltites of having the equity in a home to fall back on for retirement has been obliterated.
The cost of living far exceeds the income level and there is no disposable income for investing in retirement. We watched a program about social security and were told that unless radical changes were made, Social Security would be bankrupt by 2040. This would be right about the time we would be retiring.
If retirees can't afford to retire now when they had pension plans available to them during thier working years, truly affordable housing, and there is still social security to collect, what kind of prospects do we have when the cost of living does not allow us the basics of life now and social security does not seem to be a future possiblity?
Bellingham, WA
Dear FRONTLINE,
Well done! Here's a little more food for thought:
. Your Frontline interviewees often referred to the expectation of living in retirement in the manner in which one has lived prior to retirement. This dilutes the power of your presentation. Most folks would be happy to just live comfortably in retirement with the expectation of living more simply than before. I think your program brought home the point that even this expectation will more than likely fall in the category of, "pipe dream" here in the near future.
. One should not base savings for retirement around the idea of working beyond age 65. This is the age of lean and mean. Businesses that must compete globally (most companies that pay decent wages fall in this category) are hiring energetic, competitive individuals who can work well in high stress environments. For that reason, people in their 60s are rarely viewed as good candidates.
. Not mentioned was the fact that an ever more important part of planning is the need to adjust mortgage payments to assure home mortgage payoff before retirement.
We should all thank goodness that nothing ever came of our president's proposal to privatize Social Security. Imagine the fiasco. It would compound to a significant degree the 401k personal investment problems pointed out in your program.
It's beginning to look like the only folks other than senior business executives who can expect a pension in the future are those in government jobs. Then again, I'm not sure how long those of who pay taxes are going to be willing to provide our civil servants with a luxury not available to the rest of us. Now there's something that will be interesting to watch.
Kenneth Cooper
Albuquerque, NM
Dear FRONTLINE,
There is a fundamental flaw with "ownership" accounts, compared to traditional pensions (I mean well-run ones, not those under-funded and looted by crooks, like those at United):
even if the total contributions to either plan are the same; even if the investment returns are the same; a pension plan can pay out a lifetime income based on median life expectancies. If an individual with a 401 tries to do that, he runs the risk that he'll be in the 49% of people who live longer than average. Those who die young will leave their money to their heirs, while those who live longer than average will live their final years in poverty.
Many "monte carlo" studies now suggest that, if a 401 is your only retirement income, you need to save a whopping 25 times your salary, to protect you from inflation and the very real chance that either you or your spouse will live into your 90's.
Robert Turner
Castro Valley, CA
Dear FRONTLINE,
The pay yourself first concept is the key to funding a livable retirement. Every time a person beyond the age of 40 receives a pay increase, the ultimate goal should be to take the increment and invest it first in any tax deferred vehicles available to them, and then in taxable investments.
It requires will power, it requires sacrifice, but you soon learn you can live with that seven year old 40-inch TV rather than the new 60-inch and a good steak tastes just as good at home as it does at Outback.
Dave Iremonger
Newark, CA
Dear FRONTLINE,
We are no longer a nation of laws. Why? In a college business class I was taught that the definition of a contract was a promise for a promise. I promise to work, you promise to provide a pension. Companies that defalt on their contractual pension obligations are in breach of contract.
Worse, is the fact that Congress seems willing to pass on these defaults to the taxpayer and the courts are doing nothing to uphold the law. For one, United has assets and they should do what is right and legal. Currently many pensions are neutron contracts, that allows the company to be left standing while its workers are blown away.
roger newell
San Diego, CA
Dear FRONTLINE,
My father had a pension from an aerospace company. It was supposed to be $2,000 per month. The bank that held it sold it to another bank, which sold it to another bank, which sold it back to the original bank, each time taking some out. He ended up getting $1,000 per month. Not fair, not right, but apparently legal.
Before he died, he said that the difference between a working person and a retired person is that a retired person only works one job. Sad, but true.
I don't trust 401 k's. I have a money market. Just as a question for the financial experts, why is it there isn't a 401 k that invests groups of investors' money into real estate, which is doing well? Why can't we have group participation into real estate? Most millionaires got there by investing in real estate, not in risky stocks. My compnay pulled an Enron, declared bankruptcy, and held our 401 k's so we couldn't cash them out, but the boss could. It became a 201 k. Nuff Said.
Carl C
Reno, Nevada
Dear FRONTLINE,
Great show. Thank you for reminding me how good my non- competative wage govenment(30% less than private enterprise)job is.
eric stachowiak
long beach , ca
Dear FRONTLINE,
Young people want too much and care little for the future. We are a pack of consumers; we have to have the latest and greatest and when all is said and done we have little or nothing.
Saving is easy but it has to become a habit. Paying interest for anything but a home loan is just throwing away money. Only use a credit card for convenience not to live beyond your means. You should care less about the CC interest rate because you should never pay any.
Always save your next entire pay raise whatever it is. Save the next spend the last. Make it a habit. And don't save - invest. No load index mutual funds. Over a 10 year period you will beat most go go fund managers. Index funds are inexpensive and easy to use. Dollar cost average into the funds and watch 'em grow. Easy rules to follow but they have to become a habit.
Our combined income was never more than $65M and that was only in the later years. We owned our own home at 55, had all the kids educated with university degrees and none had any debt when they graduated, we own all our cars that are older but well maintained and will work another 15 years.
We have no defined pension (wife will have a small one from the school district but it will be very small). We are the victims of a company, Kaiser Aluminum, bankruptcy and yet we will retire on $60 to 70M by using 4% of our nestegg social security.... It can be done but it takes a little discpline and staying away from the consumer mentality. Less is more...
Spokane Valley, WA
Dear FRONTLINE,
Your excellent report did not address retirement income options besides 401k investments and employer-defined benefits. I'm an employee, but also a landlord.
If I work ten more years (my employer has defined benefits) I'll increase my defined benefit by about $10k annually (note, not available to me at until age 62). Compare that to constructing three new rental units this summer (my labor plus a bank loan).
The three new rentals increase my annual income by $15k (after a 7-year mortgage is paid off). For me, it makes more sense to build housing rentals. My solution to retirement will rely on:
social security, 401k investments, IRAs, and rental income. Any one of these would not be enough.
Eric Muehling
Fairbanks, AK
Dear FRONTLINE,
Here's the math:Ten years ago, at age 36, I started contributing to my 401K. 5 years ago, I started putting the maximum amount I could into it. I currently have over $100,000 in there and hope to have over $1,000,000 by the time I retire. I don't make a lot of money (only about $40,000 gross annually)but I put the maximum I can in and I pick funds that have low fees and good long term returns.
If I had started when I was 20, I'd be able to retire early.
The 401K system needs a lot of improvement, but it does have value for those who know how to make the best use of it.
Louis Villaescusa
Costa Mesa, California
Dear FRONTLINE,
Thank you for an interesting and informative program. My conclusion that this is just another example of how the US economy has changed so dramatically.
There has been a shrinking of the middle class. Therefore, it doesn't suprise me that "stealing" the middle class'future is par for the course.
Eric Elrod
Salem, OR
Dear FRONTLINE,
I found your presentation very informative, but unfair in one aspect. Your angle seemed to be: traditional pensions are better than the current 401K system.
However, you also negatively represented companies now moving to 401k plans managed by a professional money manager within the company. Doesn't this seem to be the best of both worlds? This is retirement money managed by a professional but belonging to the employee, not the company. This way, if the company goes bankrupt, the money doesn't disappear. Seems to me, this is better than either a pension or 401k.
Also, you unfairly mentioned the percentage of retirement money provided by the employee without simultaneously mentioning the change in wages. It is possible that people are being allowed to take home more on their checks because the company is putting less into the pension. If this is the case the fault is with the employee - it is common knowledge that Americans make more and save less than any other developed nation.
Lon Young
Bryan, Texas
Dear FRONTLINE,
I was disappointed in your treatment of the retirement issue. The changes to bankruptcy laws and expectations are certainly a part of the story. However, where were the mentions of related individual trends? The equally dramatic rise in personal bankruptcy rates or the dramatic reduction in personal savings rates both seem relevant. Aren't these trends indicative of some irresponsibility on the part of prospective retirees? As it is, the program places blame only on corporations and their executives without asking what role retirees as a group have had in shaping their own destiny.
The bottom line is that it's not enough to be debt-free and have a job--one has to have a significant positive savings rate and build assets. I am 28 years old and have no illusions about the future: it's up to me to establish my own retirement. Money from outside sources (a pension or even Social Security) would be icing on the cake. Indeed, it would seem odd to cede responsibility for the last years (or decades!) of my life to anyone else.
Edward Clarkson
Decatur, Georgia
Dear FRONTLINE,
As for myself, thanks to not being concerned about impressing others with cars, homes, vactions, etc., I, at 49 (and having experienced the adventures of a career in manufacturing) feel OK about my position. With a little luck, I just may retire with dignity in my early 60's.
My concern, however, is that the 401K system is tied so closely with the performance of the stock market. With unsustainable mega-trends in personal debt, government budget deficits and national debt, unsustainable trade deficits, soaring costs for energy, education, food, medicine, and the defense of our nation, and finally, the prospective long-term attractiveness of US currency in global markets; I cannot help from being suspicious about a perfect storm brewing for the US economy.
Michael Laber
Fort Thomas, Kentucky
