Xer retirement? Dream on

No Hollywood ending yet, dear readers, to PhillyInc’s four-part epic of economic woe and whoa for Generation X. Today, in Part III, we watch the group’s retirement dreams get sucked into Darth Vader’s Death Star.

Here’s what we know: Folks in their 30s and early 40s are in deep hock and are making less than Dear Old Dad. (For a rehash and more, go here). But Generation Hexed is also being stiffed on pensions — and may have to pay higher taxes for underfunded Social Security as Baby Boomers ahead enter retirement.

“You’ve got an 80-million-population-strong Boomer sucking down all the benefits, being replenished by 40- to 45-million Generation X,” says Nora Martin, a University of South Carolina business lecturer who has studied Xers from a market-research angle.

“They don’t trust companies providing a 401(k),” Martin told me. “They don’t trust that the company won’t turn their back on them.”

Gee. I wonder why.

Between 1983 and 1997, the percentage of workers covered by traditional pensions - defined benefit (DB) plans — declined from 35 percent to 21 percent, according to the then-U.S. General Accounting Office.

What’s replaced the coveted DB pension? Those fabulously volatile vehicles known as the 401(k) and other defined contribution (DC) plans. DC plans increased from 11 percent to 25 percent during the same period. Hardest hit: younger workers.

“The older they are, the more likely they are to work somewhere that has a pension,” said Barbara D. Bovbjerg, GAO’s director of education, workforce and income security issues.

As if that’s not bad enough, Bovbjerg notes that current Xer wages are getting zapped by rising health-care costs.
“People have less ability to save,” she said, “but at the same time we’re asking them to do more for their retirement.”

In its April 2003 study on the issue, GAO said Xers would collect less at retirement than Boomers, unless payroll taxes rose.

“An increase in the payroll tax, of course, reduces the amount of an individual’s disposable income available to both consume and save,” the GAO wrote.

Darth? It’s me. Your boy, Luke. Help!

Mike Armstrong is away. Contact Maria Panaritis at 215-854-2431 or mpanaritis@phillynews.com