Retirement's Unraveling Safety Net

In 1996, she suffered a much bigger blow to her security when her husband, a union construction contractor, died of Lou Gehrig's disease. In the process, Cody has learned to tolerate significantly more risk than her father had to. The 2001 stock market plunge following the Sept. 11 terrorist attacks posed no threat to Junior Paugh's pension check, for example, but it savaged his daughter's 401(k) balance. While her funds have mostly recovered, Cody said, "my biggest fear is what if we're hit again and go into another slide?"

Always frugal, she became even more so after her husband's death. Her home in Essex paid for, she put herself on a budget, with a goal of accumulating $5,000 in savings, "in case the washer broke, in case I needed new tires." She created a separate bank account, paying into it from each paycheck, even before buying groceries. When she reached $5,000, she said, $10,000 sounded safer. She passed that, and is still going. She also invested her husband's death benefit and insurance in mutual funds, and invests in a growth fund for her grandson. But she said that her 401(k) and savings amount to $114,000 -- far short of the $400,000 a financial adviser told her she will need to support herself in retirement.

Her job as an administrator in a medical practice reminds her daily of other risks. Unlike her brothers and her father, she has no expectation of retiring with lifetime health insurance. "I'd like to be like my father and never be sick or have medical needs, but if I'm not, I see every day that Medicare doesn't begin to pay for what health care costs," she said. Her father-in-law, a Bethlehem Steel Co. retiree, lost his retirement health insurance when the company declared bankruptcy, and he had to pay thousands of dollars when he needed a pacemaker, she said.

Amid these rough waters, Social Security represents an island of stability. At 56, Cody is not likely to face benefit reductions, since every proposal so far exempts people 55 and older. But while she supports Bush's call for private accounts, she said she worries more about the system's long-term solvency.

"It does give me huge peace of mind to know I won't have to think about what I have to live off when I'm a certain age," she said. "But of course I worry what will be there for my children and grandchildren. Sometimes I think things look as bleak for them as before Roosevelt started all this."

The Grandchildren

One measure of the unraveling of old-fashioned retirement security is that the younger generation of Paughs does not even expect to find it. "Security to me is about having options in case something happens," says Jessica Paugh, 29, an assistant manager at Sears in the Harford Mall in Bel Air.

Daughter of Dan and Joyce, she says she lost confidence in the old order when her mother lost her job of 21 years. "It was heartbreaking," said Jessica, who is now a convert to the Ownership Society. "Now, every day a company is buying another company. So I figure if this works out, great! I love my job, but it could change, and I'll adapt."

Indeed, the Ownership Society looks much like a Sellership Society from the younger Paughs' encounters with it. Sears was sold last spring to Kmart, with potential implications for Jessica. Her cousin Pamela Cody took a cut in benefits when the locally owned answering service where she worked was sold to a national chain. And Jessica's father and uncle know only too well that GE could sell their division, just as Lockheed Martin sold it in the 1990s. Dan Paugh recalls the response of a Lockheed Martin official to workers' surprise about that sale: "For the right price, my best hunting dog is for sale."

In Junior Paugh's day, when experience was valued on the production line, cradle-to-grave security and loyalty to one employer made sense for companies and workers. But for the younger Paughs, who have watched jobs, capital and products cross borders ("Our payroll operation is in India!" Doug exclaimed), the invisible handshake can seem like handcuffs.

Doug's daughter Lindsay, 21, recently left a job as a bank teller to work for a rival bank that offered a raise and promotion, but she forfeited three years toward a pension. The pension was not a factor, she said, because if she hadn't left now, she was certain to leave later. This remark led her mother, Melanie Paugh, who has worked 13 years for BMW, to close her eyes momentarily, as if to steady her spinning head.

"Today, if kids see a $10 raise, they jump," she said. "We were raised to stay put."

Jessica accompanies Junior Paugh to Martin retirees' gatherings sometimes, and loves meeting his former co-workers, but cannot believe that all these years later these men still talk about their old company. "They still care about what goes on there -- it's just really hard to imagine," she said. "For me, a job is where you work."