Retirement's Unraveling Safety Net

The Boomers

For the children of Junior Paugh -- Kay, 56, Doug, 54, and Dan, 50 -- the Social Security debate is only the latest reminder that nowadays few things keep coming.

Doug and Dan followed their father into the Martin company, which became part of Martin Marietta and then Lockheed Martin until their division of about 700 workers was sold to General Electric Co. several years ago. Now named Middle River Aircraft Systems, still housed in the hangar where Junior Paugh worked, it manufactures thrust-reversers for commercial airplane engines. Dan is a senior buyer; Doug is a painter.

Unlike many who started out with them, the brothers have survived all the reorganizations, and still have the prospect of retiring with full pensions and lifetime health insurance, like their father. Typical of companies that still provide these plans, theirs conditions full benefits, which include health insurance for life, on more than 25 years of service -- a tenure common in their father's generation, an anachronism in theirs.

"I know we're the fortunate ones," Doug said. "My kids definitely won't get anything like this."

It is not certain that they will either; they know of others who got caught short. Dan had a counterpart in purchasing at the Boeing Co. who had 20 years of service when her division recently was sold to a Canadian company. Her pension benefit was frozen, a 33 percent reduction from the full benefit, and she became ineligible for retiree health insurance. Dan's wife, Joyce, took the same hit in 2001 when her job at Lockheed Martin was eliminated after 21 years. She has since found work at a machine shop, but without a comfortable pension, she said, "It feels like I'll have to work till I die." Last week's news that United Airlines can terminate its pension plans in the largest corporate default in U.S. history sounded to them like more of the same.

So Social Security is hardly the biggest worry.

"As I understand it, people my age could end up getting less than we expect from Social Security, but not too much less, so I feel that it will be there in some form for me. It's not like the government will sell you out," Dan Paugh said. "But a company could. As a middle-class person, this scares the daylights out of me."

Their dream, the brothers say, was to do as well as their father: a good job, good wages, a nice-enough house, a family trip now and then. And so far they have. They may even have a similarly secure retirement, buoyed in part by their ballooning home values. Dan's house in Essex has more than tripled in 20 years; Doug's in Cecil County has doubled in five.

Although they and their wives have been contributing to 401(k) plans for 20 years, the brothers say they would not have enough for a comfortable retirement if not for their homes. They may sell them and downsize.

They face a major savings challenge that Junior Paugh didn't: providing for grown-up children. While Junior had 15 years of peak earnings with no child-rearing expenses, Doug has three children, ages 18 to 24, still at home, along with one 4-year-old grandchild. And Junior's daughter, Kay Cody, at 56, is raising her 15-year-old grandson for her daughter, Pamela Cody, 35, a supervisor for a Towson answering service who says she barely can pay her own expenses.

Kay Cody knows the ownership society well, ever since her pension was converted to a 401(k) in the 1990s, forcing her to learn to manage her own retirement savings.

"Growing up, we didn't focus on stocks and mutual funds," she said. "But when they explained the 401(k) to me, I thought, 'That's a darned good idea.' I made sure I understood and kept track of it. Since then, I've taken finance classes, and now I'm on our committee here that monitors how we invest our funds."