Consumer Advice for Retirement Savings

What was the Times trying to tell us?

“Social Security Jitters? Better Prepare Now,” read the headline of a money story in the New York Times last Saturday. “At last,” I thought, “here’s a consumer piece that might actually help people.” And up to a point it did at least offer some advice for some people. Stop eating out so much, buy smaller cars, give up manicures and tennis clubs, and save for that time when you’re old. If such spending doesn’t stop—which, it should be pointed out, helps other sectors of the economy—young folks may face a lower standard of living in retirement. They might even live on cookies and cat food, which some seniors once did back in the 1950s and 1960s, before Social Security benefits were indexed for inflation. Social Security, remember, pulled older Americans out of poverty.

The story was basically about the consequences of raising the age at which younger workers can collect full Social Security benefits. The story did mention other options for making the adjustments that most experts say must be made to Social Security so the system can pay full benefits after 2037, but it concentrated on the one that is fast rising to the top.

Times reporter Tara Siegel Bernard consulted a slew of financial planners who advised a healthy dose of belt-tightening, and offered a bunch of dire “guesses” as to how much of a cut in benefits Congress would likely enact. Said the Times:

Several financial planners told us they were assuming that clients in their 30s and 40s might receive just 50 to 80 percent of their full benefits or they may figure that the cost-of-living adjustments applied to benefits won’t keep pace with inflation.

The paper asked economist Laurence Kotlikoff of Boston University to determine how upper middle class couples currently in their thirties, forties, and fifties would fare if the normal retirement age for full Social Security benefits were raised to seventy. Using Kotlikoff’s assumptions, raising the age amounted to nearly a 20 percent benefit cut, because people would have to wait three years longer to get the same amount of money. They’d have to save to make up difference.

Okay, we get that. But the Times didn’t go deeply into whether families with lesser incomes than the Family Hypothetical could save, given all the pressures on income these days. It did concede that some people may not have the “wherewithal” to save more, and noted that half of Social Security recipients take their benefits early because they need the money. Then it went on to talk about how a “family with more flexibility might fare.” Flexibility? Was the Times trying to avoid the word wealthier, and dismiss what some experts say could be a potentially devastating effect on those with lower incomes? Next time the paper crunches numbers it would be good to broaden the research question and ask how those with less flexibility—a.k.a. less income and fewer assets—might do.

That seems especially important when viewed in context of another piece in the paper that day—Bob Herbert’s column, which examined some data from another Boston economist, Andrew Sum of Northeastern University. Sum’s research showed that in the current recession, corporations were particularly nasty to their workers. He found that layoffs and dislocations were out of proportion to the economic hits corporations were facing. “I’ve never seen anything like this. Not only did they throw all these people off the payrolls, they also cut back on the hours of the people who stayed on the job,” Sum told the Times.

What does all this have to do with Social Security? If people are out of the work force for long periods, for any reason—mean corporate practices or raising children—their benefits will be lower. Too bad Bernard’s story did not make the links among what people earning during their lifetimes, their Social Security benefits, and the current jobs picture.

But, then, maybe it won’t matter anyway. Was the message really buried in the kicker of Bernard’s story? It quoted a Michigan financial planner, one George Papadopoulos, who advised that he will continue to tell his clients “not to highly rely on Social Security and think of any money coming their way as gravy.” Social Security as gravy, not the meat of retirement income, which it was always meant to be? If people are starting to think that way, then the Times and other news outlets need to examine what the sources of red meat will be—good employer pensions are now on life support; 401(k) plans are too small for millions of workers to provide significant income anyway; personal savings are hard to amass. Only then will any cut in Social Security benefits have contextual meaning.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.