Even early 401(k) supporters believe the U.S. retirement funding system is broken

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Slate‘s Helaine Olen summarizes recent articles and research studies to paint a scary view of America’s retirement funding crisis, including a Wall Street Journal piece reporting that early advocates of the 401(k) retirement account are now admitting that it’s doing a lousy job of helping folks save for retirement:

The Wall Street Journal’s Timothy Martin tracked down several early proponents of the 401(k) and asked them what they think of their innovation, which has supplanted the traditional pension at most companies. . . .

Herbert Whitehouse, a former Johnson & Johnson human resources executive who pushed the then-new savings vehicle in the early 1980s, now says even he can’t retire until his mid-70s if he wishes to maintain his standard of living, because, Martin writes, his 401(k) “took a hit” in 2008. He’s 65. And Ted Benna, the man most frequently credited for the 401(k) as we know it, says he doesn’t believe “any system currently in existence” can help most Americans finance their financial needs in retirement.

Olen summarizes recent research studies documenting the depth and breadth of this crisis:

The Center for Retirement Research currently estimates that about 52 percent of households are “at risk of not having enough to maintain their living standards in retirement” with “the outlook for retiring Baby Boomers and Generation Xers far less sanguine than for current retirees.” The Economic Policy Institute says just under half of households headed by someone between the ages of 32 and 61 have nothing saved for retirement.

Cassandra Calling

In a Slate piece from last March, Olen reveals her exasperation in writing over and again about a retirement funding crisis that America is sweeping under the rug:

News flash: Americans still aren’t saving enough money for retirement.

No doubt you are tired of reading this story. I’m certainly tired of writing it.

“The United States is on the verge of a retirement crisis,” I proclaimed in 2013. I repeated myself in 2014. And again in 2015. And, now, 2016.

I can relate. On a much more modest level (in terms of readership, that is!), I’ve been sounding this call for many years on this blog:

Two tales of the Times (2016)

Two articles published in last Saturday’s New York Times drive home a pair of contrasting narratives about aging and retirement prospects in the United States. One paints an idyllic picture of retirees who have the flexibility and financial resources to engage in adult learning activities for pleasure and intellectual company. The other details the challenges facing women who became unemployed in their 50s during the Great Recession and who have struggled to find work since then.

Is America “On the Beach” about its retirement funding crisis? (2015)

Is America simply waiting for the huge, coming crisis in retirement funding to overtake us? What happens then?

The situation reminds me of the 1959 movie, On the Beach, starring Gregory Peck and Ava Gardner. In the film, Australians are attempting to carry on with their everyday lives, while knowing that massive, deadly nuclear fallout, which already has wiped out most of the rest of humanity, is heading their way. When that occurs, they, too, will have no hope for survival.

Hard looks at joblessness, retirement funding, and Generation Jones (2014)

Many members of “Generation Jones,” that span of late Boomers and early Gen Xers who are in their middle years, face tough times right now. This cohort has been hit especially hard by the ongoing economic crisis, with many losing jobs in mid-career and finding it difficult to obtain new employment and to save for retirement.

The three-pronged political attack on the very notion of retirement (except for a few) (2013) 

In America, the very notion of a relatively safe and secure retirement is under relentless attack, and much of this broadside is coming from well-monied corporate interests, aided by supportive far-right politicians.

This is not by accident. Only when you connect the dots do you see a unifying force, and it’s very, very political. We haven’t been comprehending how the pieces come together because, frankly, concerns about America’s retirement funding crisis tend to be examined in silos, such as (1) Social Security; (2) public employee pension funds; and (3) 401(k) balances.

Retirement expert: “Most Americans will become poor or near-poor retirees” (2012)

According to economist Teresa Ghilarducci, one of the nation’s leading experts on retirement policy, “(i)t looks like most middle-class Americans will become poor or near-poor retirees,” adding that “(t)he baby boomers will be the first generation that will do worse in retirement than their parents.”

When Boomers retire (or try to): America’s coming train wreck (2010)

Do I have it completely wrong, or is most of America ignoring the coming economic and social train wreck that will occur when millions of Baby Boomers realize they do not have sufficient resources to fund a relatively comfortable retirement?

I’ve been trying to connect the dots, and the emerging picture of the Boomer retirement crisis frightens me….

In her March Slate piece, Olen urged the presidential candidates to make the nation’s retirement readiness a major campaign issue. Instead, we got the ugliest, most vulgar campaign in modern American history. I don’t know what it will take for the nation to wake up to what is before us, as millions of Boomers (followed closely by Gen Xers) move into their later years. Even the relatively quick-fix responses, such as raising the payroll tax limit to allow Social Security to maintain current benefit levels and — hopefully — to increase benefits for those in need, do not appear to have a lot of political support in Washington D.C.

Poor, aging, and on the road in America

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A photo essay by John Glionna and Francine Orr for the Los Angeles Times profiles the life of Dolores Westfall, age 79, who travels the country in her rickety recreational vehicle in search of work:

Westfall — 5 feet 1 tall, with a graceful dancer’s body she honed as a tap-dancing teenager — is as stubborn as she is high-spirited. But she finds herself these days in a precarious place: Her savings long gone, and having never done much long-term financial planning, Westfall left her home in California to live in an aging RV she calls Big Foot, driving from one temporary job to the next.

She endures what is for many aging Americans an unforgiving economy. Nearly one-third of U.S. heads of households ages 55 and older have no pension or retirement savings and a median annual income of about $19,000.

. . . Many rely on Social Security and minimal pensions, in part because half of all workers have no employer-backed retirement plans. Eight in 10 Americans say they will work well into their 60s or skip retirement entirely.

The piece notes that while more fortunate retirees may pack up their RVs to cross the country sightseeing, Westfall (whose fall from the middle class was precipitated by the Great Recession) and others are traversing America in search of work. Most of these jobs are of limited duration and pay poorly. In Westfall’s case:

Her seven-year journey has taken Westfall to 33 states and counting. She’s worked as a cavern tour guide, resort receptionist, crowd control officer, hustling clerk at an Amazon warehouse. Others like her have cleaned toilets, picked beets, plucked chickens.

Her monthly income consists of $1,200 in Social Security and a $190 pension, plus pay from her seasonal jobs. She owes $50,000 on her credit cards. There’s also a $268 monthly loan payment for her aging rig.

Westfall embodies what journalist Jessica Bruder, interviewed two years ago by NPR’s’s Here and Now program, has called the phenomenon of “workampers.” Here’s the intro:

A story in Harper’s Magazine opens a window into some of these people. They’re called “workampers” (a contraction of working and camping) and they travel across the country in their RVs, often performing seasonal work, selling fireworks, pumpkins, Christmas trees. They even work part-time in huge Amazon warehouses.

Jessica Bruder is author of the story, “The End Of Retirement: When You Can’t Afford To Stop Working,” in the August issue of Harper’s. She told Here & Now’s Robin Young that this movable work force is a great thing for companies like Amazon.

Even if workamping does not become a dominant option for cash-strapped seniors, a growing retirement funding crisis awaits us. A huge cohort of late Boomers and early Gen Xers — a group that just missed out on the golden era of employer-provided pensions — is hurdling into middle age and beyond with scant retirement savings. For example, a 2015 study by the non-profit National Institute on Retirement Security concluded, among other things:

The average working household has virtually no retirement savings. When all households are included— not just households with retirement accounts—the median retirement account balance is $2,500 for all working-age households and $14,500 for near-retirement households. Furthermore, 62 percent of working households age 55-64 have retirement savings less than one times their annual income, which is far below what they will need to maintain their standard of living in retirement.

Beefing up Social Security payments and strengthening Medicare are two obvious options to help close the financial gaps facing many seniors now and in the future. Unfortunately, we heard very little discussion about America’s retirement readiness during the awful, just concluded presidential campaign. If early assessments are correct, the Trump Administration will be looking to cut Social Security and Medicare payments for seniors, which will only worsen the human impacts of the burgeoning crisis.

Elizabeth White’s advice for “Jobless After 50”

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Elizabeth White received a lot of well-deserved kudos for her Next Avenue blog essay, “Unemployed, 55, and Faking Normal,” which looked at the lives of unemployed professional women, many of whom were caught in the throes of the Great Recession:

You know her.

She is in your friendship circle, hidden in plain sight.

She is 55, broke and tired of trying to keep up appearances. Faking normal is wearing her out.

To look at her, you wouldn’t know that her electricity was cut off last week for non-payment or that she meets the eligibility requirements for food stamps. Her clothes are still impeccable, bought in the good times when she was still making money.

Now White is back with a new Next Avenue piece, “Jobless After 50? Here’s What To Do First,” which draws upon her new book containing advice, guidance, and resources for those who find themselves unemployed at midlife.

Her first piece of advice is to create a “resilience circle”:

You likely already know one person among your friends and friendly acquaintances who is faking it, and that person likely knows another, and so on. That’s enough to begin.

Approach that person. Tell him or her that you’d like to start a small Resilience Circle to support each other and to discuss issues related to aging and living a good life on a limited income.

Don’t make the group too big. You will be sharing personal information and don’t need a cast of thousands for that (what’s said at the meetings should be kept confidential).

For those in situations similar to what she found herself in, she further recommends:

  • “Stay active.”
  • “Intensify or reinvigorate your sidelined artistic endeavors.”
  • “Keep a journal or several, each with a different purpose.”
  • “Never accept anyone who thinks you’re old.”

Targets of workplace bullying, mobbing, and abuse

In a 2015 blog post, I related White’s first piece to the challenges that often face middle-aged workers who have been bullied out of their jobs:

This topic intersects with workplace bullying, because middle-aged workers endure a lot of it. When work abuse culminates in their termination or departure, they often face multi-level challenges in trying to pull themselves together and obtain new employment.

I also cited survey data from the Workplace Bullying Institute “showing that workers in the 40s and 50s are frequent bullying targets” and noted that I’ve talked to “many women in their 50s who have been bullied out of their jobs and then face the daunting challenges of recovering from the experience in terms of psychological well-being, employment, and personal finances.”

In sum, there is a lot of overlap between Elizabeth White’s work and the realities that face those who have been severely bullied at work in midlife. I have her book on order and look forward to spending time with it.

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Relevant past blog posts

With “encore careers” increasingly for the wealthy, avocations and hobbies should take center stage

Hard to do without $$$

Hard to do without $$$

“Encore careers” is a term that has come to capture the dynamic of experienced professionals who step off of demanding, if highly paid, treadmills to pursue work that is more soul satisfying and contributing to the community. There’s even a popular website (tag line “second acts for the greater good”) and a book devoted to encore careers. The inherent idea is this: You’ve made your pile of cash, or perhaps invested/inherited/married your way into it. Now it’s time to get away from the grind and do something more personally fulfilling.

I’ve written about encore careers on several occasions here on this blog. For those who can afford to move in this direction, the possibilities are rich. But it is increasingly clear that the option of pursuing an encore career will be available to very few Boomers and Gen Xers, and likely to few Millennials as well. The reason basically boils down to personal finances, including the costs of living, schooling, and raising a family, as well as the challenges of saving for retirement. Too many are already earning a modest income. They don’t need a lower paid encore career to put even more pressures on their financial well being. And for those who are underemployed or unemployed, the notion of an encore career may be sheer fantasy.

This is not to say that vocational mobility and new careers are impossibilities. Far from it. Additional training, education, and certifications can open up doors for people who are returning to the workforce or trying to switch gears. It isn’t always easy, but viable options exist.

However, the encore concept of making a bundle and then switching to a “making a difference” career isn’t very realistic for many people.

So even if earning a living at a job that provides scant psychic income is in the cards for the longer haul, does this mean that personally fulfilling work and activities can never enter one’s life picture? Nope, not by a longshot. For years, I’ve been promoting immersive avocations and hobbies as potential keys to a fulfilling life. They may include artistic and creative endeavors, outdoor and sporting activities, caring for animals, political and social causes, side gig businesses, intellectual projects, lifelong learning, community and faith-based service, or enjoyable pastimes.

In unusual instances, that avocation or hobby could transform into a decent paying, full-time gig. But even if it doesn’t, it can fill a gap in one’s life left by the intersection of work and personal obligations. Such activities may be enormously fulfilling and meaningful.

The challenges of finding personally rewarding work at decent pay will continue. Against this backdrop, vocations and hobbies will loom larger as sources of individual fulfillment. If you’d like to ponder this topic further, I invite you to read these earlier articles:

What’s your hobby? (2015)

Targets of workplace bullying: Pursuing healthy, immersive activities away from the job (2015)

On “quit lit,” “encore” careers, and the realities of creating work options (2015)

Our avocations and hobbies: The third pillar of work-life balance? (2012)

Will our avocations save us? (2010)

Embracing creative dreams at midlife (2010)

A $400 question: America’s desperate and dwindling middle class

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Neal Gabler is a successful writer whose personal account of sliding down the economic ladder due to career ups and downs, kids’ college costs, and questionable spending decisions has gone viral. Published in the current issue of The Atlantic, Gabler’s tale of being in the heart of midlife with precarious personal finances and dubious retirement prospects has struck a chord.

Before jumping into his own story, Gabler shares facts and figures that should give all of us a chill, including a recent Federal Reserve Board survey of American consumers, which featured a question about how respondents would cover an unexpected $400 expense:

The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

Holy smokes.

Gabler counts himself among those who would have trouble scrounging up $400. He makes clear that he’s not blaming the world for his situation; in fact, he takes responsibility for his actions and decisions:

I don’t ask for or expect any sympathy. I am responsible for my quagmire—no one else. I didn’t get gulled into overextending myself by unscrupulous credit merchants. Basically, I screwed up, royally. I lived beyond my means, primarily because my means kept dwindling. I didn’t take the actions I should have taken, like selling my house and downsizing, though selling might not have covered what I owed on my mortgage.

It’s a thought provoking and sometimes disturbing piece about middle class anxieties, pressures to keep up with the Joneses, and how quickly both time and money pass through our lives.

Lingering effects of the Great Recession

Gabler may not be blaming his personal finance woes on our economic system, but plenty of evidence suggests that most Americans are subject to the slings and arrows of an unforgiving market economy and significant wealth inequalities.

Nicholas Fitz, writing for Scientific American, documents our misconceptions about wealth and income distribution in the U.S.:

The average American believes that the richest fifth own 59% of the wealth and that the bottom 40% own 9%. The reality is strikingly different. The top 20% of US households own more than 84% of the wealth, and the bottom 40% combine for a paltry 0.3%.

. . . The median American estimated that the CEO-to-worker pay-ratio was 30-to-1, and that ideally, it’d be 7-to-1. The reality? 354-to-1. Fifty years ago, it was 20-to-1.

Ben Leubsdorf, in a piece for the Wall Street Journal, writes about the lasting economic and psychological trauma of the Great Recession:

The recession ended seven years ago, but persistent joblessness and underemployment marred the economic expansion that followed. A growing body of research suggests the economic trauma has left financial and psychic scars on many Americans, and that those marks are likely to endure for decades.

About one in six U.S. workers became unemployed during the recession years of 2007, 2008 and 2009. Today, nearly 14 million people are still searching for a job or stuck in part-time jobs because they can’t find full-time work.

Even for the millions of Americans back at work, the effects of losing a job will linger, the research suggests. They will earn less for years to come. They will be less likely to own a home. Many will struggle with psychological problems. Their children will perform worse in school and may earn less in their own jobs.

Retirement prospects

Labor economist Teresa Ghilarducci (New School for Social Research) is one of the nation’s leading experts on retirement funding. Though most of her work is contained in academic articles and studies, she has recently authored a slim 116-page book, How to Retire with Enough Money: And How to Know What Enough Is (2015), which I highly recommend. Two years ago, Dr. Ghilarducci told The Week (subscription may be necessary) that “This is the first time that Americans are going to be relatively worse off than their parents or grandparents in old age.” Figures cited in the article back her up:

A stunning 45 percent of all American households with people still in their working years have nothing at all saved for retirement. Among those ages 50 to 64, 75 percent have less than $28,000 put away. Even among the most prepared Boomer households, savings average just $140,000, far too little to fund a 20-plus-year retirement. All told, Americans are at least $6.8 trillion short of what they need for a comfortable retirement, according to the National Institute on Retirement Security.

In her book, Ghilarducci avoids pointing the finger at individuals for alleged overspending or failure to save. Rather, stagnant incomes and a sharp decline in employer-sponsored pension and retirement plans are among the major culprits. She urges readers to undertake both personal and political action to improve America’s retirement security prospects.

***

My conclusion? We’re facing a major reckoning on a national and global levels when it comes to economic issues big and small. I concur with Dr. Ghilarducci that the responses will have to be both personal and political.

More to come: The experience of everyday wealth differences

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A guest contributor to The Guardian‘s “What I’m really thinking” column — apparently a female student — writes about the awkwardness of making social plans with friends who have a lot more money than she does:

“I’ll meet you there,” I say. “I’ve got something to do first.” That’s a lie. I just don’t want to take an hour-long taxi with you; the fare for that is outrageous. No, better to take public transport and spend an extra hour and half to save the money.

. . . Make no mistake, I am by no means poor, but by your standards I might as well be. When we go out for dinner, I scream inside at the cost. Often I don’t eat, saying I’ve had something already or I’m not hungry. Some people ask if I’m anorexic, because they never see me eat a proper meal outside school.

Iceberg ahead…and we’re steaming into it, full throttle

Of course, the socially awkward dilemmas confronting a younger person with less disposable cash than her friends are one thing, while deep inequalities in income and wealth are quite another. At least here in the U.S., I believe those inequalities have been, and continue to be, intentionally baked into our economic and political infrastructure. And they are becoming evident across the generations.

For example, here’s a piece of writer Sarah Kendzior’s insightful take on the “post-employment economy” that confronts many recent graduates:

A lawyer. A computer scientist. A military analyst. A teacher.

What do these people have in common? They are trained professionals who cannot find full-time jobs. Since 2008, they have been tenuously employed – working one-year contracts, consulting on the side, hustling to survive. They spent thousands on undergraduate and graduate training to avoid that hustle. They eschewed dreams – journalism, art, entertainment – for safer bets, only to discover that the safest bet is that your job will be contingent and disposable.

On the other end of the generational spectrum, you have late Boomers and early Gen Xers — a cohort that just missed out on the golden era of employer-provided pensions — hurdling into middle age and beyond with scant retirement savings. For example, a 2015 study by the non-profit National Institute on Retirement Security concluded, among other things:

The average working household has virtually no retirement savings. When all households are included— not just households with retirement accounts—the median retirement account balance is $2,500 for all working-age households and $14,500 for near-retirement households. Furthermore, 62 percent of working households age 55-64 have retirement savings less than one times their annual income, which is far below what they will need to maintain their standard of living in retirement.

My prediction? Without significant changes, we are going to see more and more instances of everyday inequality staring us straight in the face. For some, this will mean quietly bowing out of pricier social activities due to a money crunch. For others, it will mean trying to maintain appearances of “middle class” status while opting for a dinner of macaroni & cheese from a box. And these will be among the folks who actually have “choices.”

I haven’t yet said a word here about climate change.

Saving ourselves from a dystopian future

Yes, I know I’m sounding overwrought. But too many indicators are suggesting that (1) we have yet to pay the full price for our inequalities and excesses, especially during the past thirty-five or so years; and (2) we have not come to a reckoning about the mess we’ve made.

For those who can afford it, there are things that can be done on an individual level: Be generous. Give to good charities. Pick up the check. Leave a nice tip. To help someone dear who is in a financial bind, give, don’t loan, and do it without fanfare. Instead, be grateful that you can afford it. (I try to hold myself to these standards, while confessing that I sometimes fall short.)

More broadly, all of us, regardless of financial status, must grasp how our economic, political, and social systems have stoked massive inequality, nationally and globally, and then help to do something about it. 

I’m not sure of all the answers, but I believe they will be a combination of changing how we live, building a more robust yet inclusive economy, and repairing our social safety net. We will have to be smarter and kinder in creating a society that places greater value on human dignity and the common good.

Two tales of the Times

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Two articles published in last Saturday’s New York Times drive home a pair of contrasting narratives about aging and retirement prospects in the United States. One paints an idyllic picture of retirees who have the flexibility and financial resources to engage in adult learning activities for pleasure and intellectual company. The other details the challenges facing women who became unemployed in their 50s during the Great Recession and who have struggled to find work since then.

Back to school (for the fun of it)

In “In School for the Sake of Keeping the Mind Stimulated,” Harriet Edleson opens with the story of a retired couple, both 68, who are enrolled in an advanced adult learning program for personal enrichment:

JOSH AND SUSAN FRIED attend classes three days a week but they never receive any grades or cram for midterms or finals. They are not trying to earn an additional degree or retrain for a new career.

. . . Dr. Fried retired from his dental practice eight years ago and moved with his wife, Susan, a former English teacher, to Rockville, Md.

. . . The Frieds are among the 150,000 men and women nationally who participate each year at more than 119 Osher Lifelong Learning Institutes. . . . Along with an array of other such programs fitting under the “lifelong learning” umbrella, they tend to attract educated, passionate people who are seeking intellectual and social stimulation among peers who often become new friends.

These adult education programs can be like going back to school, but without final exams and term papers. According to Edleson, these “lifelong learning programs position themselves as communities where the participants not only take on challenging subjects but also seek to engage more deeply with their fellow students.”

As I’ve written before, later-in-life transitions aren’t limited to immersing one’s self in books and ideas that may have escaped post-adolescent attention spans many years ago. Still other empty nesters, near-retirees, and retirees are creating “encore” careers that allow them to pursue work that is more soul satisfying and contributing to the community.

Overall, for those in good physical and financial health as they grow older, the present and future are bright. For guidance, they can access a growing body of self-help and personal development literature and online content detailing how to maximize life’s second half. The choices are and will continue to be plentiful.

Searching for work at fiftysomething

In “Over 50, Female and Jobless Even as Others Return to Work,” Patricia Cohen opens with a different type of story, one of a woman in her fifties who has not worked since a 2007 layoff:

Laid off at the start of the recession from the diagnostic testing firm in Seattle where she spent more than three decades, [Chettie] McAfee, 58, has not worked since 2007.

. . . Ms. McAfee is part of a group that has found the postrecession landscape particularly difficult to navigate: women over 50.

. . . A new study on long-term unemployment from the Federal Reserve Bank of St. Louis found that the prospects for women over 50 darkened after the Great Recession.

. . . The employment picture has definitely improved since then, economists point out, and more older women have managed to return to work. Still, the waves from the recession, which ended six and a half years ago, continue to upend many people who were cast aside during and immediately after the storm.

Hard evidence of age discrimination against women helps to fill in the picture. Nancy Collamer, writing for Next Avenue, reports that a “National Bureau of Economic Research study, Is It Harder for Older Workers to Find Jobs? , offers ‘robust evidence of age discrimination in hiring against older women.’”

Apples and oranges?

Concededly, we’re talking about two different age cohorts here, so I’m not suggesting there’s a direct comparison. But it’s noteworthy that one piece is touting the intellectual and cultural enrichment options available to retirees of sufficient means, while another is spotlighting the job hunting woes of a group 10 or 20 years behind them who, absent dramatic changes of fortune, will never have those choices.

In fact, a 2015 U.S. Governmental Accountability Office study on retirement readiness documents the limited retirement savings of retirees and workers in their mid-50s and older:

Many retirees and workers approaching retirement have limited financial resources. About half of households age 55 and older have no retirement savings (such as in a 401(k) plan or an IRA). According to GAO’s analysis of the 2013 Survey of Consumer Finances, many older households without retirement savings have few other resources, such as a defined benefit (DB) plan or nonretirement savings, to draw on in retirement . . . .

My own interests in these topics have been spurred by the effects of workplace bullying on middle-aged workers. While bullying at work is difficult to deal with at any stage of one’s life, it can be especially challenging for individuals who experience it later in their careers and lose their jobs in the process. Furthermore, there’s evidence to suggest that middle-aged women, in particular, are vulnerable to bullying behaviors.

While some are examining how to help the  older, long-term unemployed, there are no easy answers. In the meantime, America’s huge wealth gap is heading into a more pronounced chronological dimension, separating those who can afford at least a relatively comfortable retirement from everyone else, with the latter group constituting a big share of the population.

Related posts

Triple jeopardy: Workplace bullying at midlife (2013)

Retirement expert: “Most middle-class Americans will become poor or near-poor retirees” (2013)

Not “Set for Life”: Boomers face layoffs, discrimination, and bullying at work (2012)

Singled out? Workplace bullying, economic insecurity, and the unmarried woman (2010)

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