The US retirement system is about to face its biggest challenge. Baby boomers are set to retire in record numbers. Are the baby boomers prepared? Is the retirement system prepared? What about those of us who are still working?
Retirement Revolution is a PBS show on retirement hosted by Paula Zahn. It airs on PBS for the first time on March 31, 2008. I watched the first episode via the website and I’ve outlined the highlights of part one below.
Note that this is the information presented by the Retirement Revolution. I’ve made commentary where I felt it was appropriate.
Part One: Hazards and Vicissitudes
We’re told that baby boomers have redefined every phase of life they passed through. Now they are going to redefine retirement.
History of Social Security and Medicare
The industrial revolution changed the traditional way we care for the elderly. Large families used to ensure parents had someone to care for them. Some parents made their heirs sign agreements to care for them in exchange for their inheritance. Now with the business cycles of the industrial economy people could find themselves out of work and unable to care for themselves let alone their elderly parents.
A brief history of retirement benefits is covered starting with the civil war. After the civil war, veterans received some benefits that were the first national retirement benefits. The Sherwood Act of 1912 granted pensions to Civil War veterans. Veterans could collect this pension at age 62.
The Great Depression
The Great Depression impacted the generation that lived through it. Those that lived through it learned to be very conservative. People did whatever they could to get by. "If you don't work, you don't eat very well."
If you have ancestors from that era (parents, grandparents, great-grand parents) you know this is true. We couldn't waste anything. My grandfather traveled around looking for work. He did everything from selling newspapers to breaking horses.
As the depression went on, popular pressure was put on Congress to develop a national retirement plan. In 1935 we got social security. In 1939 widow and survivor benefits were added.
In the 60's disability insurance and Medicare were added. Recently President Bush added Medicare part D which helps pay for prescription drugs.
However, the plan was supposed to be self funded. As it turns out the politicians grossly underestimated the cost of the plan in the long run. The system has been close to bankruptcy twice already.
Congress has been spending the social security surplus. Social security was supposed to be a trust fund specifically for retirement. It turned out to be a slush fund for federal spending. The trust fund is expected to go bankrupt around 2040 because of the number of baby boomers retiring.
Is there going to be any money left after the baby boomers are gone? What do we get for contributing to social security? Will we (the children of the baby boomers) have benefits?
Today's Retirement Options
Pension plans used to be a reliable way to plan for retirement. Pension plans are disappearing. Government and business is shifting the burden of retirement planning to individuals. It can be a better deal for the individual if you plan correctly.
Only 20% of those in the workforce today will get retirement money for a defined benefits package. Some benefits plans are underfunded (30 or 40 cents for each dollar that should be there). This is especially true in old line industries and industries in economic trouble (like the airlines). Pension Benefit Guarantee Corporation is supposed to ensure pensions are paid as promised.
Most public pension plans (state and federal) are fully or overfunded. However there are some that are not well funded. It’s amazing how the government workers pension plans are so well funded, isn’t it?
This show claims social security has "created the middle class" because it solved old age poverty. That’s a very bold claim made by one of the experts interviewed. This claims calls for some further research on my part.
Medicare is especially important because of the amount of medical expenses that old people have. The newest part of Medicare is part D which pays for drugs. As people age their medical expenses tend to rise quickly. Many seniors require several prescriptions and have a high probability of serious medical problems.
The cost of health care threatens to overwhelm the system. Now we have a hodge podge of private and public medical systems. Heath care is now 16% of the economy. Medicare and Medicaid count for 5% of the economy. They could account 20% of the economy by 2050.
They interviewed a young couple who had cancelled their health insurance to save money. The husband got into a motorcycle accident and ended up $30,000 in debt because of medical bills. I’m not sure why a young, able bodied couple is included in a show about retirement.
I’m getting a little tired of the media showcasing stupidity. He couldn't sell his motorcycle? Also he was out of work "because of a newborn child." We had a child and managed to stay employed. Should someone else pay for your bad decisions? Medical care is expensive so get insurance, end of story.
Planning for Retirement
You have a few options when you retire:
- Go to Florida (Arizona)
- Go to the Nursing Home
- Stay Home -Beacon Hill Village is an association that allows people to live in their own home and get the services and help they need. This could be a template of other organizations that allows seniors to stay in their own homes.
I didn't understand the point of farmer/hippies towards the end. They basically chose lifestyle over financial security and they still had enough money for retirement.
As you can tell I was taking notes during the show. I wasn’t that impressed by the part one. I would rate it 3 out of 5 stars. The show jumped around way too much and was a little hard to follow. It presented government in a very favorable light while portraying business in a less favorable way. I wouldn’t call it a balanced look at retirement.
I’m watching part 2 next. Hopefully it will be better than part one.
Article Links
Retirement Revolution Website pbs.org
Watch Retirement Revolution Online wttw.com
Tags baby boomers medicare Retirement social securityRelated Posts
- Retirement Revolution - Part Two
- Interest
- What is a Roth 401(k)?
- Gas Prices - Part 1 - Why Does Gas Cost So Much?
- High Gas Prices - What Can We Do About It? Gas Prices Part 3