Middle-class Americans' retirement at risk

— -- Through most of his working life, steelworker Ray West looked toward a secure retirement. His company pension would bring in around $30,000 a year, his union contract guaranteed retiree health coverage and he had 401(k) savings of about $50,000.

Three years ago, it unraveled. His company filed for bankruptcy. The collapse reduced his expected pension to around $5,000 a year and canceled his retiree health insurance. And, in three years of unemployment since then, West blew through all the money in his 401(k) as he trained for a new career.

"I lost my job after 27 years before I got my retirement," said West, 52, of Hazel Park, Mich. "I ain't going to get nothing."

Of all the threats to the American middle-class standard of living, from stagnating incomes to piles of consumer debt, perhaps the least understood and among the most serious is the looming crisis in retirement. Several trends, each debilitating alone, are due to converge on the middle class over the next decade or so.

Traditional pension plans are disappearing in the private sector. Workers aren't saving enough in their voluntary 401(k) accounts. Longer life spans are stretching savings even thinner. Social Security remains under stress. Furthermore, all that was going on before retirement plans lost $2 trillion in the recent stock market dive.

Taken as a whole, the trends point toward a massive problem as people now in their 40s and 50s start to retire in 10 to 20 years.

Alicia Munnell, a professor of management and director of the Center for Retirement Research at Boston College, has developed a retirement risk index that shows 43% of households are in danger of not being able to maintain their living standard once they retire. She projects that risk to grow over time, and it gets worse for those lower down the income scale.

"A transition group is really going to suffer a lot until we say, 'Let's do something,' " Munnell said. "The early boomers and particularly the late boomers are going to have a terrible time."

Baby boomers are defined as people born between 1946 and 1964, a mass of Americans just reaching retirement age.

Besides the potential human tragedy facing seniors who lack adequate means, a lowering of living standards among elderly people could blunt the growth of the American economy.

Seniors 65 and older today make up 20% of all U.S. households. As the senior portion of the population increases with the aging of boomers, widespread economic pain among elderly people could slow spending and place greater burdens on caregivers, who include families and social services agencies.