University of Florida Levin College of Law UF Law Scholarship Repository Faculty Publications Faculty Scholarship 1-1-2004 Hope We Die Before We Get Old: The Attack on Retirement Patricia E. Dilley University of Florida Levin College of Law, [email protected] Follow this and additional works at: http://scholarship.law.ufl.edu/facultypub Part of the Elder Law Commons, and the Retirement Security Commons Recommended Citation Patricia E. Dilley, Hope We Die Before We Get Old: The Attack on Retirement, 12 Elder L.J. 245 (2000), available at http://scholarship.law.ufl.edu/facultypub/175 This Article is brought to you for free and open access by the Faculty Scholarship at UF Law Scholarship Repository. It has been accepted for inclusion in Faculty Publications by an authorized administrator of UF Law Scholarship Repository. For more information, please contact [email protected]. HOPE WE DIE BEFORE WE GET OLD: THE ATTACK ON RETIREMENT PatriciaE. Dilley The American institution of retirement has sustained numerous attacks over the last twenty years, to the extent that it may cease to exist by the time most of today's workers reach their midsixties. Professor Patricia Dilley describes how all of the components of the "three-legged stool" that represents private pensions, personal savings, and Social Security, have declined so significantly in recent years that the combination may not be able to provide support for the elderly in the future, particularlythose retired seniors who are in the lower and middle classes. Changes in employment policies, the markets for retirement savings investment, and the public policy surrounding the Social Security debate threaten the mainstays of golden years income upon which Americans have come to rely. Professor Dilley explains that previous civilizations were able to sustain the elderly members of their populations Patricia E. Dilley is a Professor of Law at the University of Florida Frederic G. Levin College of Law, teaching tax, pension, Social Security and elder law in the J.D. and Graduate Tax Programs. Professor Dilley worked on Social Security issues at the Committee on Ways and Means of the U.S. House of Representatives from 1981 to 1987, where she was one of the principal drafters of the 1983 Social Security Amend- ments. She has published extensively on pensions and Social Security. Professor Dilley thanks the College of Law for generous research grant support for the work on this article, and her research assistants Eugene Fowler and Thomas McLaughlin for their help. No thanks are owed to the combined efforts of Hurricanes Bonnie, Charley, Frances, Ivan, and Jeanne, in spite of whose devastating effects on Florida this article was completed in 2004. 246 The Elder Law Journal VOLUME 12 before retirement became the entitlement that it is today, but that the older members of those societies worked long past what is now deemed appropriateretirement ages and often relied upon family members or charity for support after they could no longer remain actively employed. She warns that unless retirement systems focus on a greater redistribution of resourcesfrom wealthy workers to poor ones, the lower- and middle-income work force will not be able to survive a retirement from work in their later years. Further, Professor Dilley argues that modern sociey need not declare a particular "retirement age" and that the system may work better if the elderly work as long as they can before retiring to certain financial supportfor theirfinal years. She concludes by suggesting a two-part, citizen-based reform program in which Social Security and social insurance would expand to fill in the gap left by shrinking employer-based pension plans while allowing individual decisions about when retirement is most appropriatefor each worker. "People try to put us down Just because we get around Things they do look awful cold Hope I die before I get old" "My Generation" The Who1 When The Who sang "My Generation" in 1965, they expressed the defiance of the baby boom generation in the face of what seemed to be their parents' generation's post-war complacency and love of conformity. Thirty-five years later, however, these words have considerable resonance in quite another context-in a nutshell, "hope I die before I get old" is the default retirement strategy for millions of their baby boomer compeers. The United States is in a rapid retreat from the fifty-year-old in- stitution of retirement as a right for workers at virtually all income levels. The combination of the implosion of the private pension sys- tem, the failure of market regulation to prevent corruption and self- dealing in the management of retirement savings in company plans, as well as in mutual funds, and proposals to "privatize" Social Secu- rity, may spell the end of retirement as Americans have come to know it in the post-World War II era. Adding to the mix are the precipitous rise in health care costs, the concomitant precariousness of the Medi- care system's financing, and the repeated rounds of tax cuts that have lead to increasing deficits and mounting national debt that will be- 1. The Who, My Generation,on MY GENERATION (Brunswick Records 1965). NUMBER 2 HOPE WE DIE BEFORE WE GET OLD 247 come particularly critical at just the time of the scheduled retirement of the baby boom generation.2 Taken together, most of the trends in retirement policy and legis- lation over the last twenty years coalesce toward one end: elimination of public and private entitlement to a stream of income in retirement, in favor of preretirement accumulation of assets that are supposed to sustain the retiree until the end of life.3 The change from traditional defined benefit (DB) plans to various types of employer-sponsored employee savings plans, such as § 401(k) cash or deferred arrange- ments, leads inexorably to a transfer of risk from groups to individu- als, and to a reliance on advance capital accumulation, rather than on transfer payments, to fund maintenance in old age. It is critically necessary to reexamine the realities behind this current national fantasy of individual self-financed retirement for all workers. If current trends continue, today's workers will find them- selves back in the pre-Social Security era-when older workers of moderate to modest means did not retire because they could not af- ford to, and once they could no longer work, lived in old age on the sufferance of family members or public charity, once their own mea- ger savings were exhausted.4 2. See Michael Aneiro, Rising Health Care Costs Could Ease in 2005, INC, Oct. 7, 2004, available at http://www.inc.com/criticanews/articles/200410/healthcare. html; Jonathan Weisman, $2.3 Trillion in New Debt Expected by 2014, WASH. POST, Sept. 8, 2004, at A2; Robert E. Moffit & Brian M. Riedl, Medicare's Deepening Finan- cial Crisis: The High Priceof Fiscal Irresponsibility,THE HERITAGE FOUND. POL'Y RES. & ANALYSIS, Mar. 25, 2004, at http://www.heritage.org/research/healthcare/ bg1740.cfm. 3. The latest statistics from the Department of Labor's Form 5500 report shows that between 1975 and 1998, defined contribution plans (which are essen- tially employer sponsored savings accounts and provide the employee only the accumulated amounts plus or minus investment increases or losses) as a percent- age of all pension arrangements grew from accounting for less than thirty percent of active participants to almost seventy percent. Similarly, § 401(k) plans, the most popular form of defined contribution plans, increased from about twenty-five per- cent of active participants in 1975 to over seventy percent in 1998. See Alicia Mun- nell et al., An Update on Employer-Sponsored Pensions, Address at the... Conversation on Coverage: National Policy Forum at the National Press Club 7-9 (July 22, 2004) (transcript on file with author). 4. See generally CAROLE HABER & BRIAN GRATTON, OLD AGE AND THE SEARCH FOR SECURTY: AN AMERICAN SOCIAL HISTORY 88-89 (1994). In the history of work, as in the history of economic well-being, Social Security emerges as the decisive catalyst of change. Until this legisla- tion was enacted, most men and women retained occupational roles well into old age.... Hidden in the obscure labor markets of the pre- industrial period, unemployed or underemployed older workers emerged as a distinct social problem in urban, industrial America. 248 The Elder Law Journal VOLUME 12 In fact, there has never been any real possibility that individual middle- and low-income workers could finance their own financially comfortable retirements at what most people consider a normal re- tirement age. Retirement as we know it today did not exist in Amer- ica prior to the institution of Social Security in 1935, and no industrial- ized nation has ever maintained a broad-based retirement system for workers at all income levels without some sort of social insurance sys- tem that spreads the risk of poverty in old age across the working population through the tax system.5 What really distinguishes mod- em retirement and care for the aging from the experience of civiliza- tions during the rest of human history, stretching at least back to Mesopotamia five thousand years ago, is the socialization of the aging dependency burden, the de-personalization of financial support for the elderly, and the expansion of work-based retirement benefits to provide basic old-age income support for most of the elderly.6 The spreading of the risk of inability to work in old age has, in- tentionally or not, created retirement as a sustained period of leisure in advance of physical and mental disability. The greater the degree of socialization of the financial responsibility for providing for the elderly, the greater the degree of independence of elderly individuals, both from their children and other relatives, and from the need to Id.; see also ANN S.