Will you ever be able to retire?

John W. Schoen Senior producer • Profile • E-mail

In 1972, when Krystyna Strozniak went to work for Western Electric, the former manufacturing arm of AT&T, saving for retirement was the last thing on her mind.

Intent on being a teacher, she soon found herself drawn to a career in telecommunications, a 31-year path that included a succession of technical jobs, the breakup of AT&T and her promotion to a management position in a piece of the company that eventually became part of Verizon. Through it all, she diligently participated in company-sponsored savings plans and enjoyed the security of knowing she would collect a monthly paycheck for life after 30 years of service.

“I never worried about retirement,” she said.

In 2003, Strozniak took the company up on a retirement buyout offer to devote herself full-time to the care of her 12-year-old son. But she opted for a lump-sum payment, which she then turned over to a professional financial adviser, in place of the security of a guaranteed monthly check.

“I don’t think it’s going to be secure and guaranteed,” she said, referring to the promised pension. “I think they may take it away some day. I see businesses now taking away health care benefits and businesses declaring bankruptcy, and they want to get rid of the pensions.”

For much of the last half of the 20^th century, the idea of retirement for many Americans included a public or private pension that guaranteed income for life and provided for a period of “golden years,” usually after age 65, spent on leisure, volunteer work or other personal pursuits. But today, the financial security of American workers is more uncertain than it has been in decades. Once reasonably assured of a comfortable retirement, Americans are now watching private pensions collapse and public pensions come under pressure. And even those like Strozniak, whose retirement security was once all but guaranteed, are now finding they have to fend for themselves.

There is mounting research that most Americans are ill-prepared to cope with the task of creating a nest egg to rely on when they’re too old to continue working. They're also woefully unaware of the risks they face in retirement investing. And they're falling further behind in providing for their long-term financial security.

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“I don’t think were going to see another generation that’s going to fully retire,” said Doug Lockwood, a financial planner who specializes in retirement at Harbor Lights Financial Group in New Jersey. “There's going to be a lot of people that are going to continue to work for the rest of their lives.”

Long list of risks
As traditional pensions fade into history, employers have shifted the financial risks of a secure retirement to individual workers through company-sponsored savings plans like 401(k)s. No matter how well you save and invest, the list of risks is a long one, according to Alicia H. Munnell, director of the Center for Retirement Research.

“We now have all the risks,” she said. “From the first day, the employee has to decide whether or not whether to join the plan, has to decide how much to contribute, has to decide how to invest those contributions, has to decide how to change those investments over time, has to decide what to do about company stock, has to decide what to do about cashing out when moving from one job to another. And then, at retirement, this person is going to get, if they’re lucky, $100,000 and be told goodbye and have to figure out what to do with that over an uncertain lifetime.  So it’s an enormous challenge.”

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As employers have shifted responsibility for retirement to their workers, they've also left them largely on their own when comes to learning how to managing their investments. Most individuals are poorly prepared to duplicate the professional investment management that is a critical component of traditional public and private pensions. So even those workers who do  accumulate retirement savings are often frozen into inaction when it comes to the daunting task of actively managing their investments, according to Lockwood.

“What a lot of people do with their 401(k) — because they still treat it like a company-sponsored plan — they don’t treat it like their own money," he said. "They put it under the pillow and really don’t think about it.”

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