Retirement News : Seniors : Family sees retirement safety net decay

Family sees retirement safety net decay

Date Added: 17-05-2005

If it's a clear morning, you can count on seeing 80-year-old Junior Paugh strolling streets that tell his life story: Propeller Drive, Fuselage Avenue, Cockpit Street, Compass Road. He's been in Middle River, Md., more than 60 years, ever since aviation pioneer Glenn Martin put him to work making seaplanes and bombers at the defense plant down the road. Franklin D. Roosevelt was president and Martin himself walked the factory floor, urging on workers as the nation went to war.

Out of that perilous time came Paugh's now predictable world. He never is short of money, thanks to Social Security and his company pension that will last as long as he does. Health care costs him next to nothing, thanks to Medicare and retiree health insurance. His home is long paid for, thanks in part to a below-market price of $4,400, a result of wartime subsidies for defense-related housing construction.

"I feel completely secure," says Paugh, no small triumph for the third of 13 children born to farmers in Depression-era Appalachia. The triumph is not only his but also the country's - the fulfillment of a New Deal vision of cradle-to-grave security, underwritten by the federal government and large industrial employers.

That vision is being supplanted by one President Bush calls the Ownership Society, in which the burdens of economic security - and, the president hopes, the rewards - shift back to individuals. Social Security is only one aspect of the shift. The safety net big companies wove for Paugh's generation - long-term employment, pension security, retiree health insurance - has been giving way for so long that its unraveling is mere background accompaniment to Washington's noisy debate over Social Security. But in the lives of most middle-class families, it stays in the foreground, inseparable from the Social Security discussion.

This becomes clear in the company of Junior Paugh, his three children, all in their 50s, and five grandchildren, ages 18 to 35. Their three-generation journey has taken them from Appalachia to suburbia, from government relief to an assembly line to a management track at Sears. Yet, despite the apparent progress, their expectations are sinking: The grandchildren, all three generations agree, have it worse than their parents and grandparents - most dramatically in their prospects for retirement, when all gains and losses come home to roost.

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Until now, financial planners have likened retirement security to a three-legged stool: employee pensions, personal savings and Social Security.
For the Paugh grandchildren, the savings leg is effectively gone, reflecting a plunging personal savings rate nationally. In place of Junior Paugh's pension, they have 401(k) plans, under which they - not employers -bear the risk and responsibility of investing enough for retirement. And under Bush's Social Security proposal, their promised benefit could drop significantly.

This is a new order with new givens. Paugh and his co-workers came of age as Democrats who felt protected by their union, their party and their government. His grandchildren are all registered Republicans who feel largely on their own in a world full of risks and responsibilities, and no guarantees. They are willing to give Bush's Ownership Society a try, saying they have no hope that government or employers can or will protect them.

The war generation

Paugh got his first job through Uncle Sam, driving a truck for the Civilian Conservation Corps, the New Deal agency that put unemployed people to work preserving natural resources. By the time he went to Glenn L. Martin Co. in 1942, wartime wage controls had led most industrial employers to provide pensions and health insurance - in part to secure their workers'loyalty in an exceptionally tight labor market.

Paugh's job even came with a home. The entrepreneur built whole communities to house his burgeoning workforce, which topped 52,000 in 1942 as military orders soared during World War II. The government subsidized the construction as part of the war effort, and Martin passed on the savings in cheap rent and later, low sales prices.

Martin named every street for an airplane part, and everyone lived in an identical 24-by-48-foot bungalow with a six-foot hallway, two bedrooms, a bathroom and a spacious living room.

Paugh did his share. He went off to war in 1943, returning with a Purple Heart for shrapnel wounds in the Battle of Okinawa. He remained faithful to Martin as well, spurning other offers, including one from the Baltimore Orioles in the 1950s. A lanky lefty, Paugh was a star pitcher for the Martin Bombers, the company's standout industrial league team, but professional baseball had nothing on a factory job in his day. "No security," he explained.

In return for this security, Paugh traded away some flexibility. In his days as a "CCC Boy," as he still calls himself, the government decided how he would spend his pay; he got $5 of his $30-a-month salary, and the CCC sent the rest home for his parents and 12 siblings.

And he would have received only a small fraction of his $920 monthly pension had he not spent his entire career, 41 years, with one employer - an arrangement dubbed the "invisible handshake." The pension is 40 percent of his retirement income; Social Security pays him $1,373. Nor would Paugh have retired with lifetime health insurance, under which he pays only $2 for prescription drugs.

Another important feature of Junior Paugh's retirement security is his thrift, which was bred into him. "We saved and saved and saved," he said of himself and his wife, who died 10 years ago. Paugh is what his family calls "tight," and proud of it. He does not turn on lights until the afternoon sun all but disappears. "Hey, I'm paying for that," he cracked one day when son Doug stopped by after work and flipped on the living room light. He'd rather sweat than use air conditioning, turning it on only when his children and grandchildren visit. ("It was 110 degrees in the South Pacific and we still won the war," he said.) As oil prices spiked, he bought a $138 electric space heater after calculating that it would reduce his heating oil bill by more than it cost.

In Paugh's day, only the wealthy invested in the stock market; Paugh put his trust in Uncle Sam through the "bond a week" savings plan. He also opened an individual retirement account in the early 1980s, with bank interest rates at 15 percent. Last year, the rate fell below 1 percent. His disappointment with IRAs makes him dubious of young people's faith in the stock market - what goes up, he warns, can come down.

At a recent monthly meeting of the Retirees Association of Martin Marietta, Paugh sat with seven former co-workers whose life experiences were almost identical to his: All 80 or older, all sitting pretty on three-legged retirement stools, and all worried about how their children and grandchildren will get by in old age.

"They spend their money before they make it," Ed Dorsey, 82, said of his children. "I say, 'What do you have for retirement?' They say it's a long way away. But they're all in their fifties!"

All said they regard Social Security as indispensable, and all said they know it cannot sustain their descendants in its current form.

"We're the generation that beat the system," said Elmer Sanders, 83. "Social Security didn't count on us living this long. I tell my wife if I have a stroke, and they put me on life supports, just don't unplug me. If I'm still breathing, the checks keep coming."

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