Special Reports

County baby boomers could be pinching pennies

Ed and Susan Cox with their dog Bailey near their home in Morro Bay.
Photo by Joe Johnston 7-23-08
Ed and Susan Cox with their dog Bailey near their home in Morro Bay. Photo by Joe Johnston 7-23-08 The Tribune

Instead of globetrotting or building their dream homes, many San Luis Obispo County baby boomers could be pinching pennies in their retirement years, according to a recent Tribune survey.

While slightly more than half of the 224 people who responded - ages 44 to 62 - reported they have enough saved to sustain them after retirement, about 42 percent said they either had not reached the point where they could retire comfortably or were unsure if they would ever have the nest egg needed to retire.

And that was before the recent stock market declines.

That’s a scary thought for a generation that is accustomed to living life to the fullest.

“I have an IRA (Individual Retirement Account), but it’s not enough,’’ said 60-year-old Maureen Titus, a dental hygienist and owner of Central Coast Smiles on Wheels, a mobile dental hygienist service. “They tell you that you should start when you’re in your 20s so that you have close to a million dollars set aside. But I don’t know anyone who has done that.’’

Boomers on the brink?

Although many boomers have accumulated vast amounts of wealth due to professional success, inheritance or real estate, these are nevertheless uncertain times for those seeking to retire.

A 2008 Retirement Confidence Survey by the Washington, D.C.-based Employee Benefit Research Institute said Americans’ confidence in their ability to afford a comfortable retirement has dropped to its lowest level in seven years. Moreover, workers who indicated they were very confident about having enough money for a comfortable retirement dropped to 18 percent in 2008 from 27 percent last year, the biggest one-year drop in the 18-year history of the survey. Workers said health costs, the economy and home values were all major concerns.

Respondents to The Tribune survey who noted they do not have sufficient retirement savings gave myriad reasons why they missed the mark. They include the high cost of living, paying medical expenses and college tuition, an inadequate income, declining property values, procrastination and poor stock performance as a result of the recent economic downturn.

Sixty-one people cited stocks and mutual funds as their only investments; of those individuals, slightly less than half said they had enough for retirement. Only 19 people said a company pension was their sole source of retirement income.

Unlike previous generations, boomers can expect to live longer, healthier and wealthier lives (poverty rates among elderly and non-elderly adults have declined during the lifetime of baby boomers). But they can no longer count on a fat company pension and Social Security to get them through their retirement years.

“Boomers are getting older in a changing America,’’ said Frederick Lynch, an associate professor of government at the Bay Area’s Claremont McKenna College who is researching a book about aging baby boomers. “Over the last 20 or 30 years, we’ve had a risk shift. Employers have progressively abandoned defined benefit programs. That was offloaded to individuals, so that where it goes is up to you.’’

Lynch added: “Now, here we sit with real estate down in some areas, and for some boomers, their primary asset is their house. The stock market is down and probably will be headed down even further. That’s why the estimates are that about 40 percent of boomers will be at risk, and if you add in healthcare expenses (nearly 56 percent of boomers in The Tribune survey said healthcare was their main concern) over their lifetime, it may be even higher.”

A study last year on retirement savings by the Center for Retirement Research at Boston College found that 44 percent of households would be at risk of being unable to maintain their standard of living, even if they work to age 65 and put all their financial assets into a an annuity, an investment tool which provides regular income throughout retirement or for a specific period of time. When rising health care costs are factored in, the percentage rises to 61 percent of households.

At the same time, the center also found that many private sector companies are no longer offering pension plans. The proportion of the workforce covered by defined benefit plans has dropped by more than half since 1980, according to the center.

Lingering in the labor force

As companies pull back on pension plans and healthcare coverage, and investment portfolios shrink, many boomers will be forced to work longer than anticipated. The Bureau of Labor Statistics reports that by 2016, workers age 55 to 64 are expected to increase by more than 36 percent, while the number of workers between 65 and 74 and 75 and older is expected to climb by more than 80 percent. Given the current state of the economy, there’s little doubt that boomers will continue to be a major presence in the workplace, said Charee Gillins, associate state director of communications for AARP.

“The slumping economy is forcing many boomers to make difficult decisions about their retirement,’’ she said. “Many of them have had to rethink their plans. Some of them have compromised their retirement savings, or they’re postponing paying bills or pulling money out of their 401ks.’’

That’s why AARP tries to educate its members about preparing for the future, Gillins added.

“You should replace about 70 percent of what you were making before you retire,’’ she said. “But that’s becoming not as possible. Considering the market changes and rising healthcare costs, it’s easier said than done.’’

For Camay Arad, 58, owner of Chameleon Fabrics, Furniture and Design, the need for income and a desire to remain active will keep her working well into her 80s, she said.

“We (boomers) are living longer, and we’re looking for that meaning in our lives,’’ said Arad, whose 96-year-old mother still lives alone. “We’re looking at second careers after retirement. I don’t see myself retiring. When you’re doing something you love, it doesn’t become an option.’’

Even so, Arad acknowledges that she’s not taking her retirement savings lightly.

“I’m very concerned,’’ she said. “I’m a woman who didn’t take care of her financial responsibilities in her younger years, and I’m trying to play catch up in my later years.”

Serious about saving

It’s not surprising that many boomers were less than committed to saving and investing, said associate professor Lynch.

“To some extent, they don’t have the time to do the planning and shopping for different plans,’’ he said. “It takes a lot of time to sit at the computer and figure out which mutual fund is good. They have kids in college, or they’re taking care of their parents.’’

While the majority of Bob Wacker’s clients have a healthy investment portfolio, some postponed socking money away for the future to have a higher standard of living in the present, said the San Luis Obispo financial adviser.

“It’s probably because we grew up without a World War,’’ he said. “It was generally a more affluent time than when our parents were coming of age. We never went through a Depression. I have clients in the older generation who have more money than they thought they would. Their biggest problem is spending it.’’

Wacker added: “While baby boomers are less predisposed to making a commitment to saving, I don’t think we are the same hare-brained devil may care people we were in the 1960s. We are more serious about it now.’’

Indeed, not all boomers have put off retirement savings.

San Luis Obispo resident Karen Colombo, a 57-year-old retired analyst with the San Luis Obispo County Sheriff’s Department, saved enough to retire 2 ½ years ago at age 55. Colombo, who worked for the county for 27 years, said she invested in a pension plan, bought several properties at a time when real estate was affordable, and then sold them for a profit.

“You can never feel secure enough, but I do feel secure,’’ she said. “I just want to enjoy the rest of my life.’’

That’s also Maureen Titus’ plan. She hopes to amass enough money to stop working in dentist offices, and continue to pursue her business part-time.

With no employer-sponsored retirement or health insurance benefits and a sputtering economy, it may be difficult to do.

Besides, just like many restless baby boomers, she prefers being on the move.

“I expect to be doing something well into my 70s,’’ she said. “I don’t see any reason why not. I can’t see myself at home twiddling my thumbs.’’