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Saving for the Future

By Annys Shin
Washington Post Staff Writer
Monday, March 28, 2005; Page E01

Pamela Ginsberg was once invited to a bar mitzvah by one of her customers and danced the hora in the family circle. At the grocery store where she works as a butcher, she has blanketed part of a wall behind the deli counter with photos and hand-scrawled notes from the children she has treated to slices of turkey. When she serves customers, she stands beneath a flying wooden cow and pig -- gifts from a man who could not get enough of her corned beef.

These are the reasons Ginsberg lists for why she likes working at the Brookeville Market in the District's Cleveland Park neighborhood.

The daughter of a Washington area butcher, Pamela Ginsberg broke her first side of beef at age 7 while standing on a milk crate. She has been in the food business ever since. (Nikki Kahn -- The Washington Post)

Ask the Experts Financial planners Stuart Ritter of T. Rowe Price, Alexandra Armstrong of Armstrong, MacIntyre & Severns and Mary Malgoire of the Family Firm offer their advice.
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Crunching the Numbers

Karen Preysnar of Armstrong, MacIntyre & Severns Inc. ran several detailed projections based on the assumption that Pamela Ginsberg put $4,000 each year into a Roth IRA that saw an 8.4 percent return -- higher than the 3 percent some economists said is more realistic. Preysnar calculated that Ginsberg's annual expenses add up to $22,500 per year and assumed an inflation rate of 4 percent.

• In the first scenario, Ginsberg receives 100 percent of her Social Security benefits and the money she made in her Roth IRA. She amasses assets of $291,677 at age 65, but that money runs out at age 77.

• In the second scenario, Ginsberg receives 89 percent of her promised Social Security benefits. (After 2041, Social Security may not be able to pay full benefits, according to current projections by the system's trustees.) Her money runs out at age 76.

• In the final scenario, Ginsberg receives 77 percent of promised Social Security benefits, which are reduced under President Bush's plan if she signs up for a private account. But she earns an 8.4 percent return on both a private account funded with part of her Social Security taxes and on the Roth IRA. She amasses $378,582. Still, her savings run out by age 78.

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"It's my life," said Ginsberg, who is also the store's kosher and specialty foods buyer. "These people are my customers, but they treat me like family."

But no pension or 401(k) plan comes attached to her job. She is 41 and has $7,000 in the bank. Her annual salary of about roughly $40,000 might seem reasonable for a single person with no children, no car and no debt, but increasingly Ginsberg frets about what her finances will look like when she stops carving cutlets and chopping prime rib.

She has reason to be concerned. A review of Ginsberg's finances by three local financial planners indicated she needs to make big changes right away, cutting out her few indulgences, and investing as much of her income as possible. Even then, they say, she is likely to run out of money and be dependent on her Social Security check.

Since President Bush first outlined his plan to partially privatize Social Security, Ginsberg said, she has followed the debate attentively, aware that she is in the age group most likely to be caught in the middle -- too young to be protected from benefit cuts, too old to fully bounce back if private accounts don't generate the expected returns.

"I've read everything I can get my hands on," Ginsberg said, noting that her perceptions about retirement were shaped by seeing her mother live comfortably on Social Security and a veterans pension after her father died. "I grew up thinking I would have Social Security to live on."

According to her latest Social Security statement, if Ginsberg continues working until age 65, she can expect to receive $950 a month, just shy of today's average monthly Social Security benefit of $955. That is enough to cover the rent she presently pays for a one-bedroom apartment in Adams Morgan, but it would leave her short for food, utilities and other necessities. Retirement planning, Ginsberg acknowledges, has suddenly become an urgent matter.

In that she is not alone. As of 2001, a federal analysis of households with at least one worker from age 21 to 64 concluded that 28 million -- more than one-third of the total -- did not have a retirement savings account of any kind. The study, released in 2003, relied on Census Bureau and Federal Reserve data.

From now to the time she retires, Ginsberg and millions of others may be asked to absorb the benefits cuts and tax increases many experts say are necessary at some point to insure the long-term solvency of a Social Security system projected to fall short by 2041 of the money needed to pay 100 percent of expected benefits. Bush has said that any changes to Social Security will preserve the existing system for anyone 55 or older; for others, the debate could change the way they plan for the future.

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