Even When You Do Everything Right, Life Happens

Digby

There’s a lot of resentment toward baby boomers among young people out there and often for a very good reason. We are an insufferably self-centered lot. (And the generation that famously used “never trust anyone over 30″ as its credo is in no position to complain.) In their view we are leaving a pretty awful world behind, one worse than the one were born into. And in their minds we had it easy. One young liberal in his 20s said to me the other day that baby boomers deserve to live in penury in their old age because they failed to take advantage of their opportunities which he doesn’t have and I suppose he had a point. A lot of us failed to get rich, something that was undoubtedly easier to do during our lives than what’s facing young people today.

It was with that conversation in mind that I read this piece about a 77-year-old man who has gone back to work:

It seems like another life. At the height of his corporate career, Tom Palome was pulling in a salary in the low six-figures and flying first class on business trips to Europe.

Today, the 77-year-old former vice president of marketing for Oral-B juggles two part-time jobs: one as a $10-an-hour food demonstrator at Sam’s Club, the other flipping burgers and serving drinks at a golf club grill for slightly more than minimum wage.

At the height of his corporate career, Tom Palome was pulling in a salary in the low six-figures and flying first class on business trips to Europe.

Today, the 77-year-old former vice president of marketing for Oral-B juggles two part-time jobs: one as a $10-an-hour food demonstrator at Sam’s Club, the other flipping burgers and serving drinks at a golf club grill for slightly more than minimum wage.

While Palome worked hard his entire career, paid off his mortgage and put his kids through college, like most Americans he didn’t save enough for retirement. Even many affluent baby boomers who are approaching the end of their careers haven’t come close to saving the 10 to 20 times their annual working income that investment experts say they’ll need to maintain their standard of living in old age.

For middle class households, with incomes ranging from the mid five to low six figures, it’s especially grim. When the 2008 financial crisis hit, what little Palome had saved — $90,000 — took a beating and he suddenly found himself in need of cash to maintain his lifestyle. With years if not decades of life ahead of him, Palome took the jobs he could find.

The youthful and perennially optimistic grandfather considers himself lucky. He’s blessed with good health, he said. He’s able to work, live independently and maintain his dignity, even if he has to mop the floors at the club grill before going home at 8 p.m. and finally getting off his feet.

“That’s part of the job,” he said. “You have to respect the job you’re doing and not be negative — or don’t do it.”

Low-income Americans have long had to scrape by in old age, relying primarily on Social Security. The middle class, with its more educated and resourceful retirees, is supposed to be better prepared, with some even having the luxury to forge fulfilling second acts as they redefine retirement on their own terms. Or so popular culture tells us.

The reality is often quite another story. More seniors who spent much of their careers as corporate managers and professionals are competing for low-wage jobs. For these growing ranks of seniors with scant savings, it’s the end of retirement.

About 7.2 million Americans who were 65 and older were employed last year, a 67 percent increase from a decade ago, according to government data. Yet 59 percent of households headed by people 65 and older currently have no retirement account assets, according to Federal Reserve data analyzed by the National Institute on Retirement Security.

“People who built successful careers, put their kids through college and saved what they could, are still facing downward mobility,” said Teresa Ghilarducci, an economist at The New School, who has studied the finances of seniors.

It’s about to get worse. Right behind the current legions of elderly workers is the looming baby boomer generation, who began turning 65 in 2011 and are reaching that age at a rate of about 8,000 a day. They’re the first generation expected to fund their own retirements, even as they live longer lives.

They, too, are coming up short. Company-paid pensions are mostly a thing of the past, replaced in the last three decades by 401(k) accounts primarily funded and managed by employees. The median 401(k) balance for households headed by people aged 55 to 64 who had retirement accounts at work was $120,000 in 2011, according to the Center for Retirement Research at Boston College.

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Those savings will provide $4,800 a year, assuming seniors withdraw 4 percent annually, the amount recommended by retirement experts to ensure retirees don’t run out of money in their lifetimes.

Little wonder that half of baby boomers aged 50 to 64 don’t think they’ll ever have enough to retire, according to a 2011 survey by AARP.

“The current retirement savings systems isn’t working, and that’s becoming a crisis as Americans who make it to 65 in good health are now living at least two more decades,” said Larry Fink, chief executive officer of BlackRock Inc. (BLK), the world’s largest asset manager.

“Longevity should be a blessing, but if you haven’t planned for it, you’re going to work much longer than you ever dreamed of doing,” he said. “Or you better be good to your children because you’re probably going to be living with them.”

I think this guy’s history is fairly typical of many middle class Americans of a certain age:

Palome grew up in Poughkeepsie, New York. His parents were both immigrants, and his father worked as a laborer. After a stint in the Navy, Palome had a chance to work at a local International Business Machine Corp. (IBM) plant. The work was steady, with solid pay and benefits. Instead, he enrolled at Fordham University to study business, relying on veteran benefits to pay tuition. His father was so angry Palome turned down the plant job that he didn’t speak to him for months.

“I knew that anyone who got into that plant never got out,” he said. “You just got stuck because of the steady pay.”

Palome landed a job at Shulton Co., the maker of Old Spice after-shave lotion and cologne, then moved to Yardley of London as a brand manager. His big break came in 1975 when he was recruited to The Cooper Cos. as vice president of marketing for the Oral-B dental-care business.

The job gave him a high five-figure income and an executive’s life at age 39. He flew first class to Cooper offices in the U.S. and in England, Sweden and Germany. He helped win an endorsement for the Oral-B toothbrush from the U.S. Olympic Committee. He had a closet filled with business suits, and on weekends he played golf with other executives.

That life turned upside down when his wife, Edna, was killed in a car accident in 1983. Palome’s daughter, then a college student, offered to come home to take care of her brothers, who were 14 and 16 years old. Palome insisted she stay in school. He took charge of the parenting and the housework.

“I was numb, in shock and trying to hold everything together,” he said. “And my sons didn’t want anyone in the house besides me, not even a housekeeper.”

When Cooper relocated from New Jersey to California, Palome didn’t want to uproot his family. So in 1980, when he was 44, he started a consulting company, with Cooper as his main client. He also did consulting for Sandoz Pharmaceuticals, Johnson & Johnson and others.

In flush years, Palome had several clients and earned about $120,000. Though he saved for his kids’ college and helped his elderly parents, retirement wasn’t on his radar.
“I never thought I’d live this long,” he said.

Because he was self-employed, Palome didn’t have a 401(k) account, and he has never had a tax-deferred IRA, or Individual Retirement Account. It’s the same for most Americans. Only about half of private-sector workers were covered by an employer-sponsored retirement plan of any kind in 2011. And fewer than 40 percent of those participated, according to the Employee Benefits Research Institute.

Many now approaching retirement began saving too late, stopped saving when they lost jobs, or borrowed against their 401(k) accounts to finance their children’s college tuition. They also often chose investments that failed to yield the best results, or they bailed out of the stock market after the financial crisis battered their savings, then missing the rebound.

“How is the average middle-class person going to amass $1,000,000 by the time they’re 65, which is what they’ll need to get $40,000 a year in income from their retirement savings?” Ghilarducci said.

Palome had lean years when he couldn’t easily save. He decided to take a job running a Friendly’s restaurant in Parsippany, N.J., from 1990 to 1993. He figured he’d acquire new skills, which have since proved useful.

“Tom always did what he had to do to keep going,” said his younger brother Peter, who’s 66 and lives in the same senior community.

Palome later ran a restaurant at a New Jersey golf club while he continued his consulting. At 64, when an 800 square foot manufactured home he’d seen in Plant City, a Tampa suburb, became available for $21,500, he purchased it with a credit card to amass frequent flier miles. He then sold his New Jersey home for $180,000, kept what he needed to quickly pay off his credit card debt and divided the rest among his children so they’d have down payments for their own homes.

“The house was theirs as much as mine, and that’s their inheritance from me,” he said.

At first everything went according to his plan. Palome enjoyed the year-round warm weather and he avoided dipping into savings by doing part-time bar-tending and catering. Then the financial crisis hit. Palome’s part-time work evaporated. His savings, which he’d invested mostly in stocks, shrank from about $90,000 to less than $40,000.

That’s the story of a long life, which basically just observes that shit happens. It’s nice to think that you can plan everything properly, make the right decisions, be smart, be successful. But you just don’t know when life is going to toss you a curve ball that sets you off on a totally different course — like the death of a spouse, an illness or an epic financial and housing meltdown that wipes out your housing equity and 401K…

I’m not trying to make excuses. But it’s important to remember that the concept of “generations” is an abstraction. Within that abstraction are real human beings who live their lives the best way they know how within the context of their time. Most of them, regardless of their time on this planet, are just average folks doing their best to live decently, raise families and find a little happiness along the way. And when you get closer to the end of the adventure you realize a lot of things you could have done differently but you were busy just living the best way you knew how.

This could happen to anyone, even those who are “responsible” and do all the right things. In a country as rich as this one it should be at least a little bit easier at the end of your life.

Social Security benefits need to be raised. For the good of every generation.

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