For those who traditionally prefer to think of retirement as the end of the beginning, rather than the beginning of the end to the good life, double-digit inflation is causing some second thoughts.
Last year, half of the retirees polled by the Harris organization said they wished they had never stoped working in the first place. Another study commissioned by the American Association of Retired Persons put the percentage of reluctant retirees at 36.
Some come down with a terminal case of shuffleboredom or find the lure of Florida fishing less attractive. Yet the simple fact is that most retirees are finding, after the fact, that they can't afford retirement. Not when their fixed income loses half its purchasing power each decade.
Consequently, early retirement, the preogative of the post-war generation, has leveled off. Pre-retirement employe counseling to help workers adjust to the emotional and financial shock is in. And senior citizens are coming out of retirement as frequently as heavyweight boxers or GOP politicians, many taking part-time jobs. The AARP estimates that passage last year of a law prohibiting almost all mandatory retirements before age 70 will result in a quarter of a million older people each year on the job.
Retirees cannot afford retirement; neither can the country.
The Social Security trust fund may run low on funds temporarily some time in the next decade. Yet political pressure is now building for a cut next year in payroll taxes. And, since fewer than 4 percent of private pension funds provide automatic cost-of-living allowances for retirees -- there is virtually no prospect a sizeable number will do so voluntarily -- that leads us per force back to a heavier reliance on Social Security.
Inflation compounds the problem, but it is not the problem itself. Demograhics foreshadow a 120 percent increase in the number of persons over 65 by 2035, while the labor force to support them will be only 6 percent larger than it is today. Moreover, productivity is declining, with the result that more people will have to be housed and fed on a decreasing number of real dollars. And the more of these dollars fed to the government rather than into private pension funds, which in turn invest them in industry, the more productivity may sink and government dependence increase.
For the past six months the president's Commission on Pension Policy has been grappling with this situation in an effort to create the country's first national pension policy. The commissioners face the herculean task of resifting the three principal ingredients of the retirement income pie: Social Security, private pensions and individual savings.
Next month they will present their first policy option paper. According to executive. director Thomas C. Woodruff, the commission is likely to recommend an increase in the minimum age at which Social Security benefits can be paid, and draft a formula on how and when such a change could be carried out.
Raising the age of pension eligibility from 62 to 65 might solve half the problem of cost, Woodruff said. In the private sector, collectively bargained contracts that start paying pensions after 30 years' work, regardless of age, remain a difficulty, however. Commissioner Martha Griffiths also suggests funding welfare benefits with general revenues.
Though no votes have been taken, the commission is giving serious consideration to mandating a private pension system, according to Woodruff. Even though c orporations now receive tax credits for donations to employes' pension funds, some businesses still are unwilling or unable financially to contribute to their employes' future retirement.
Since it would be prohibitively expensive and therefore politically impossible to raise the tax credits high enough to induce them to do so, a law requiring pensions -- and with it minimum permissible benefits -- might be the only alternative to expanding Social Security. At the same time the national policy would be likely to encourage personal savings through tax incentives.
Were such recommendations to be translated into law, the impact, Woodruff concluded, would be more fundamental than the Employe Retirement Income Security Act of 1974, which standardizes those private pensions systems employers chose to set up. These changes could be of a magnitude comparable to the establishment of Social Security itself during the Depression.
Yet, as Woodruff and Griffiths point out, the commissions's final report is more than a year away and enabling legislation even farther. There are nonetheless a slew of pension bills pending on Capitol Hill and congressional action is expected on at least some during the next session.
The most critical in terms of time is the Multiemployer Pension Plan Amendments Act, which determines how the government's pension plan insurer, the Pension Benefit Guaranty Corp., will cover workers in industry-wide plans, like steel or millinery makers.
Although action has been delayed twice, Congress appears determined this time to pass legislation by the May 1, 1980 deadline. To keep the insurer from going broke when it has to assume paying benefits of failed companies -- a Chrysler bankruptcy could cost it up to $1 billion in liabilities -- the administration has proposed a bill raising insurance premiums, reducing benefit levels for retirees, and making employers who pull out of pension plans liable for continued funding. Pressure from unions opposed to lower benefits for members and from corporations opposed to being saddled with a greater share of liabilities has made the bill very controversial and compromise likely.
Sen. Harrison Williams (D-N.J.) has introduced a bill raising Individual Retirement Accounts and Keogh plan ceilings and eventually linking them to the Consumer Price Index. Thus the IRA would be raised to a maximum of $2,000 in 1980 from the present $1,500, the Spousal IRA from $1,750 to $2,400, and the Keogh from $7,500 to $10,000. After the IRA reaches, $5,000, the Keough maximum would be set at twice the IRA maximum. Thereafter all increases would be tied to inflation. The bill would also let employes make limited, voluntary, tax-deferred contributions to existing company pension plans.
A Williams-Javits basketful of ERISA improvements is making progress in the Senate. One provision would establish a separate independent pension agency. Another would make it easier for widows to receive their husbands' benefits in case of death before retirement.
Companion legislation has been introduced in the House. In addition, a bill will be introduced next week to bring a modicum of federal control over state and local pension plans, those myriad plans covering public employes like police and teachers.
The Gerneral Accounting Office has projected that funding of these plans, many of which are on a pay-as-you-go basis, will become a national problem in 15 years and benefits endangered. Already in 1975, the GAO found public plans had $150 billion in unfunded liabilities. The bill would set (financial) disclosure and fiduciary, but not funding, standards.
Elsewhere in the pension world, the Labor Department's Pension and Welfare Benefit Programs section has stepped up its crackdown on misappropriation of pension funds by their managers as in the case of publisher William Loeb who tried to use employe money to buy a printing press.
This year it has started actions to recover some $25 million.
Finally, this year has stirred a new grassroots consciousness of pension problems, according to Karen W. Ferguson, director of the Pension Rights Center. On the benefits side, groups like the Nader-inspired Citizens' Commission on Pension Policy and the Gray Panthers, along with the AARP, have forcefully argued the positions of retirees before the Presidential Commission and Congress.