This was not how it was supposed to work.
Two major market crashes in a single decade have smashed the assumptions of retirement savers everywhere. And now, numerous employers are reneging on their part of the retirement equation - taking the dollars off the table they've traditionally added to workers' 401(k) savings just when employees need the help most.
It's happening across the country, at publisher Houghton Mifflin Co., at Beth Israel Deaconess Medical Center, at Xerox Corp., and at General Motors Corp. Companies looking to cut costs amid the slow economy are trimming or eliminating retirement contributions to conserve cash. Many employers and consultants say it's just temporary, that these retirement benefits will come back in better times. But to millions of working people, there's a growing sense that when it comes to retirement, they're on their own.
What retirement?
Michael Tow, president of the financial planning firm New Boston Financial: "It really puts the onus back on the individual," Tow said. "You can't rely on other people. You have to do it yourself."
As the traditional pension plan has all but disappeared, it's disconcerting for workers to see employers take away their last remaining contribution to retirement....
The New York Times Co., which owns The Boston Globe, has asked the Globe's union employees to ratify contracts that give up 401(k) matches. That, along with other concessions, is meant to help the paper save about $20 million.
For firms like Fidelity Investments that manage money in retirement plans, it's in their interest to advise corporate clients not to make draconian cuts. They are telling companies to trim back their matches if they have to, but not to eliminate them. Cutting the benefit not only hurts employees' savings efforts, the company said, but it removes a key incentive to getting workers - particularly younger ones - to save.
Jobs? Save? Where?
And the pullback is coming on the heels of last year's massive stock market decline, which devoured more than a quarter of the value of the typical retirement plan, and $1 trillion in total. The result has been a psychological blow to workers, wondering how they will catch up.
No BAILOUT for WORKERS, 'eh?
Nicole Cannava, a 31-year-old who works at Bank of America in Boston, said her retirement plan savings have dropped in half, to $10,000. She knows she has at least 30 years to save if she retires in her sixties, but, she said, "It's not fun to see what I've worked for go down."
You better hope you can keep that job, lady.
Michael G. Doshier, a vice president of marketing at Fidelity Investments, which holds nearly one-quarter of all the 401(k) assets in the country, acknowledged the psychological toll of the market's drop and plan cuts. "Because of the sheer depth of this market downturn, people are rethinking investing and saving for retirement in general," Doshier said. "There is clearly an emotional side."
Yeah, and you are not supposed to be "emotional" when you have been fleeced and looted.
Indeed, that message hasn't escaped anyone who's had the guts to check an online retirement calculator recently. Most people over 40 are finding that they have to save more to make up for the large, recent losses. And even younger workers face an uphill climb, as many have seen their early savings efforts all but evaporate.
Translation: It was stolen.
There's also a major recalibration underway of what investors can expect even in better times. Assumptions of 10 percent average annual gains have been scaled back to 7 percent or 8 percent by many professionals, making the savings goal that much harder to reach. Planners say annual return targets in the range of 10 percent or more that emerged in the boom years of the late 1990s are now probably unreasonable. It's common, they say, to weigh recent experience more heavily than the past - which is why it's natural to be pessimistic right now....
The reality is, workers have little choice but to keep saving whatever they can on their own. And most are doing so even in the worst of times, according to Fidelity. The company says 97 percent of its customers have continued to stash money in their plans....
Why let Wall Street play with it until they loot it?
Alicia H. Munnell, director for the Center for Retirement Research at Boston College and a former Federal Reserve Bank of Boston official, said she expects the same thing to happen this time around. "My sense is that when this recession is over, employers will reinstate," she said.
Why?
Munnell said cutting the employer match does dissuade some people from saving but "there's no alternative. If you don't save through your employer's plan, you're not going to save at all. Lecturing people to save more on their own is just wasting wind."
Or whatever you call it!
Who can afford to save -- if they even have work?
