Rethinking Retirement for Boomers’ Era

Retirement for many people is like a cliff.

One week you are working five days, and the next week they throw you a party, eat peanuts and sip champagne with you and offer a few hollow words of praise--and you are out the door. Now you have five empty days a week to fill. For some people, this is a great vacation. For others, it is a yawning void, with too much time and not enough money.

What if you want to move from five days of work a week to one or three or four?

Our current system doesn’t operate that way. You have to retire, collect the pension and then look for a part-time job if you need extra money or simply want to work. If you want to take retirement in stages, forget about it.

But perhaps we should take a fresh look at this issue before the hordes of baby boomers pour by the millions into the ranks of the retired.

After all, boomers are going to live longer than their parents.

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When Social Security was started, with an age of 65 for full retirement benefits, most people didn’t expect to last that long. Today, millions of people live healthy lives well into their 80s. The baby boomer generation, those born between 1946 and 1964, will have multitudes living into their 90s.

Boomers’ own anxieties, combined with society’s needs, are likely to dictate a change in retirement systems.

“Many baby boomers are already adjusting their expectations,” said professor David L. Morgan of the Institute on Aging at Portland State University in Oregon. “Some are planning to work longer, especially at part-time jobs. Others are anticipating a more frugal lifestyle than their parents have experienced in retirement.”

Many people “want very much to continue to work and prefer to work on a reduced schedule,” said Karen Ferguson, executive director of the Pension Rights Center in Washington. “But as a general rule it is usually a choice between your pension and your salary,” she noted.

Many pensions are based on the average salary in the last three or five years of work. If somebody goes to a three- or four-day work week en route to retirement, he or she would ultimately suffer a financial penalty, a reduced pension when taking full retirement.

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Letting people work longer may make sense from a personal economic point of view, “but from the regulatory and legal way we do things, it would require a lot of changes,” said Martin Regalia, the chief economist at the U.S. Chamber of Commerce.

For example, a person who works more than 1,000 hours a year would qualify for the same fringe benefits--medical care and pensions--as a full-time worker who puts in 52 weeks, or 2,000 hours yearly. This is a protection in the labor laws against exploitation of part-timers, but it also inhibits companies that might want to hire older workers and are deterred by the cost. Maybe there is some way to make a special exemption for older workers who want extra cash, but don’t need health coverage because they have Medicare and don’t need additional pension credits.

Another deterrent is the Social Security earnings test. Persons between ages 65 and 69 drawing Social Security face a wage limit of $14,500 for 1998. For every $3 in earnings above that limit, they lose $1 in Social Security benefits.

Social Security was designed in the depths of the Great Depression, when the goals were to provide the elderly with security in retirement and get older workers out of an economy suffering from a 25% jobless rate.

Social Security, combined with private pensions, has made mass retirement a universal experience. In the 1940s, more than 90% of men between ages 55 and 64 were in the work force. The percentage began dropping steadily with every succeeding decade and has been hovering around 67% since the start of the 1990s, according to the Bureau of Labor Statistics.

Most people now collect Social Security benefits starting at age 62. They receive an amount equal to 80% of the check they would receive at 65, the age for full benefits.

However, the situation could change dramatically as boomers work longer because they need the money or want to stay on the job for satisfaction or prestige.

“When it comes to making good use of our aging work force rather than goading older workers to retire, our public policies are perverse,” according to Alan Reynolds, research director of the Hudson Institute, an Indianapolis-based think tank.

“Historical anxieties about there being enough jobs are now quite irrelevant,” Reynolds wrote in a recent study. “The real problem is going to be finding enough workers to fill the jobs that will certainly be offered, even if the economy grows slowly.”

Reynolds wants public policy to encourage Americans to stay in the work force. He backs elimination of the Social Security earnings test and wants to permit reduced fringe benefits for part-time workers.

Current law offers a retirement bonus benefit of 5% a year for workers who postpone taking Social Security after the age of 65. The benefits go up 5% a year until age 70. The bonus is scheduled to jump to 8% in the next century, but Reynolds wants the 8% to be offered now.

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All these ideas and others are worth debating before boomers begin retiring, around the year 2010. Flexibility is needed to encourage longer working lives, but without a weakening of protections we have established in pay and benefits for working people.

The 76 million baby boomers are members of a generation so big it threatens the viability of the Social Security and private pension systems.

This generation, which once lived by the watchwords “Don’t trust anyone over 30,” sees age 60 coming into view like a ship on the horizon getting ever closer. The retirement system demands changes before that ship reaches port.

Robert A. Rosenblatt reports from Washington on economic and financial news, health policy,

and aging issues. His e-mail address is Bob.Rosenblatt@latimes.com