Q: My wife and I were blessed to be able to raise and educate our two children. But as difficult as the financial burdens were before retirement with both of us working, we are finding it more difficult now, after retirement, to make ends meet. Our incomes consist of Social Security, two pensions - both of which are less than we were promised because our former employers were bought out several times, and a bit of interest and dividend income from our meager investments. Recently, my wife was diagnosed with dementia, and I take medications that cost me more than $500 monthly because the company retiree health plan that I was promised was dropped. We are in our mid-70s and seem to be going backward with higher bills and less income. We thought about selling our home to get the equity and move into one of those graduated living communities, but economically, we would not be able to make it. We don't want to sell our home, but I feel I have to make some decisions about our future, especially based on my wife's diagnosis and my not knowing how long I will be able to care for her and myself. Any suggestions?
A: Unfortunately, the "golden years" that so many seniors were looking forward to have been tarnished by broken promises. Despite painstaking preparation for retirement, more and more seniors are being subjected to unanticipated economic challenges for which they could not have planned. For example, who would have believed that former employers would renege on promises to pay pensions and provide health benefits, leaving millions of seniors without the income and benefits upon which they relied? And, to add insult to injury, who would have believed that these breaches of trust would be blessed by the same U.S. Congress that seniors helped elect to protect them?
When you couple the dismal job done by our elected officials in protecting seniors with the rising prices of health care, prescriptions, gasoline, taxes and just about everything else in what we are told is a "non-inflationary" economy, it is little wonder there are millions of folks just like you who are being caught flat-footed because no one could possibly have planned for what you are facing. And when you add family illness to economic insecurity, it is simply overwhelming.
More and more seniors, even those fortunate enough not to be suffering from chronic illnesses, are finding the need for "post-retirement readjustment" of their financial considerations in order to try to generate more cash flow to either replace income loss or make up for higher expenses. The challenge is not to go into assets to the extent that you will outlive your money.
Not too long ago, employer or work-related pensions were a major source of income for retirees, and about one-third of retirees received some amount of private pension based on prior employment, not to mention health care. While Social Security was never intended to, and does not, totally replace the loss of employment income, it stretches even less when former employers are allowed to pull the economic and health care rugs out from under retired employers while CEOs get a pat on the back and a big, fat bonus for reducing expenses and increasing stock prices at the expense of former employees.
But even with private pensions, retirees are seeing their spendable income reduced over time, and what might have seemed to be a generous pension at retirement age may seem small at age 80. And, as the value of the static pension payment declines, so do retirees' ability to maintain a semblance of their former standard of living.
- Jan Warner is a member of the National Academy of Elder Law Attorneys and has been practicing law for more than 30 years. Jan Collins is editor of the Business and Economic Review published by the University of South Carolina and a special correspondent for The Economist.