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From the Great Society to the Great Anxiety

No longer able to count on Social Security or a lifetime job, baby boomers are fretting for their future. But their sheer numbers might tilt the nation toward new solutions.


Baby boomers worry and wonder these days.

They have a lot on their minds: the threat of downsizing, the need for retirement planning, the costs of sending kids to college and expenses of helping their own elderly parents.

All this is a big load to carry, even for the self-confident generation that defined American culture and politics and business ever since they were babies in the 1950s.

"We have the Great Anxiety, not the Great Society," said a North Carolina woman, digging out a political motto from the Lyndon Johnson Administration, as she emerged recently from a session with her financial planner.

"People talk about working longer and harder without getting any extra money because they just want to stay on the payroll," said Paul Ling, a clinical psychologist in Quincy, Mass.

"I saw a man last night who is putting in 50 or 60 hours a week on the job, and his wife is nine months pregnant," Ling said. "There is considerable marital strain and strain in his own head."

For baby boomers, "the American dream is starting to fray to some degree around job security and health issues," said Ling, who is 42 and worries that managed care will cut into his own business.

But perhaps the gloom and doom are overdone. After all, the sheer numbers of the boomers, 76 million strong, will demand that the political system, and society, meet their needs.

Boomers--Americans born in the years 1946 through 1964--have significant advantages over their parents' generation. In 1950 just a scant 9% of men and 6% of women were college graduates. But one in four boomers has a college degree.

And they are affluent--the top 20% of boomers enjoyed an income of at least $56,000, according to a special study by the American Assn. of Retired Persons.

With this solid educational and economic foundation, the vast majority of middle-class boomers can calm down a bit and take a close and reasoned look at the economic challenges they face.

The oldest ones turned 50 this year, and retirement is within hailing distance, making them pay close attention to the need to save every extra penny they can squirrel away.

Much of the retirement money amassed by the boomers will be invested according to a theme familiar to veterans of the 1960s--Do Your Own Thing. Gradually on its way out is the traditional pension plan, the defined benefit, in which a company invests the money and the worker is promised a fixed pension each month after retirement. Thousands of these traditional plans have been scrapped, and the number of workers enrolled in them has remained in a narrow range, between 39 million and 41 million since 1980.

Meanwhile, there has been an explosion in the popular defined contribution plans, in which workers set aside a share of salary, with a partial match from the employer.

Companies like them because they cost less than the traditional retirement plan. Workers enjoy them because they can decide where to place the funds, and then can take the money when they leave a job. These defined contribution plans have leaped from 22 million participants in 1980 to 42 million now, according to the Employee Benefit Research Institute.

However, the boomers are more exposed than their parents when it comes to the ultimate size of the pension. The risk, as well as the potential greater reward, has been shifted to their shoulders.

"This means a lot more people have been given responsibility for some portion of their retirement income," said Carolyn Piucci Pemberton, an EBRI spokeswoman. The workers, not the company, must "make decisions on how much they are going to invest and how they are going to invest it," she said.

If the investments prosper, the boomers could do a lot better than their parents when they retire. Just half the population ages 66 to 84 receive a private pension today. And among those who do, the median sum--half get more and half less--is a modest $6,000 year.

If the stock market performs well over the long run, and it has yielded an average gain of 10% a year for the modern era, boomers' pensions from the salary set-aside programs could be generous.

If boomers insist, the same higher-risk, higher-reward strategy could also be applied to Social Security, the most important of all retirement programs for the vast majority of Americans.

By the year 2010, when boomers will begin retiring, Social Security will spend more money paying benefits than it collects in payroll taxes from workers and their employers. A massive surplus accumulated during current years when the retiree population is stable will be rapidly exhausted, and by 2030, the retirement trust fund will only be able to pay 75% of the benefits it owes.

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