By Robin Wojtanik
Terry Chick is among a growing percentage of Baby Boomers who rely on a Social Security check every month as a main source of income. But it’s not a position he expected to be in after decades of full-time work.
[blockquote quote="Don’t call me frugal. Call me cheap." source="Terry Chick" align="right" max_width="300px"]
“I’ve never been to a financial planner,” he said.
Chick’s face may be familiar to Tri-City residents after years working as a TV anchor, completing a career with stints at CNN, FOX Sports Network and Sports News Network. Yet despite making $165,000 at his highest point, Chick admitted his life choices left him without a substantial retirement savings and he began drawing Social Security when he was first eligible, at age 62.
As the self-proclaimed “Cheapest Man in the Tri-Cities,” Chick, 63, of Kennewick, takes pride in saving more than he spends. “Don’t call me frugal. Call me cheap,” he quipped.
He said he has no regrets about his financial decisions and said his Social Security checks, which average $2,000 a month, are enough to cover his basic expenses with enough left over for golf.
To estimate the number of Americans in a similar situation, The Blackstone Group, an independent research firm, conducted a research study that examined the number of Baby Boomers relying on Social Security for their retirement income.
Using online responses from 1,000 middle-income Americans ages 52 to 70, it found 38 percent of those surveyed planned to use Social Security as their primary source of income as they age.
This is up from 30 percent of those surveyed prior to the financial crisis in 2008.
A Tri-City financial planner reported he is seeing similar decisions made locally.
Kevin Gunn of Pacific Crest Planning in Kennewick said many Tri-Citians were expecting to have a pension in the same way their parents did. This includes many current and former Hanford employees. But most companies stopped offering pensions in the mid-90s and not everyone took stock of whether they would have enough money to live on by the time they hit retirement age.
Some Boomers began to contribute to a 401K or IRA, only to be rocked by the 2008 financial crisis, and subsequently pulled their money out of the markets, never to re-invest. Gunn said he’s confident most long-term investments would have recovered by now, if given the chance. But in his practice today, he finds Baby Boomers are “a lot less aggressive” with their investments.
“Twenty years ago, people had money they could afford to lose,” said Gunn, adding that clients knew they might need to lose money to make money in the long run. He said he finds this isn’t the case today, when most Boomer clients behave more conservatively with their savings.
As a result, Gunn has found people aren’t living as comfortably as they would like. He said he hears more from people who believe it was easier to retire 20 years ago and would likely have paid off their home before doing so. Now, “they are willing to do without,” he said.
This includes Chick, who was willing to walk away from his savings to create an amicable divorce before moving to Eastern Washington.
“I arrived in the Tri-Cities with $5,000 and what I could fit behind a Chrysler Sebring,” he said.
Chick faced a series of devastating blows that altered the course of his retirement plans. His fiancée died in 2014 from an undiagnosed blood clot to her heart and he lost his job after a DUI arrest the following year.
“I should have followed the advice I gave my kids years ago: there’s no cab ride that costs as much as a DUI. Lawyer fees, court fees and then subsequent interlock ignition for five years all add up to about $16,000. Heck, I could’ve bought my own cab for that,” he said.
Chick decided it was best to retire rather than seek new employment.
He wanted to remain in the Tri-Cities and has aligned his expenses to allow him to do so, continuing to drive a 17-year-old car and performing his own vehicle repairs, when possible.
Chick remembered reporting on the limited effect the 2008 financial crisis had on the Tri-Cities. And Gunn agreed, saying, “It was more of a mental game to people.”
Despite government contracts remaining in place, or increasing, Gunn found people read the national headlines on home values crashing or job losses and were easily spooked.
As a result, Gunn has seen many Boomers choosing to work longer and deferring their ability to take Social Security beginning at age 62. He said those who are drawing on Social Security at 62, “have had an issue” with their finances and were forced to rely on a program originally designed to be a safety net.
As a result of the crisis, Gunn and his colleagues are working harder on education when speaking to clients about their investments. They’re spending more time than they used to show people the statistics and data behind potential investments, hoping to reduce the fear of risk-taking when investing in the market.
The Blackstone Group study also found two-thirds of middle-income Boomers surveyed do not feel they have personally benefitted from any economic recovery.
Gunn isn’t willing to place the blame solely at the feet of the economy. He cited “poor choices” as a large part of the reason why more people are finding themselves without retirement savings,
Gunn believes many Boomers, unlike their parents, are unwilling to delay gratification and are more likely to spend income that could be put away for retirement. Additionally, the average life span for an American is longer than when Social Security was first designed, and people are often relying on a system that wasn’t intended to support them for 10, 20 or even 30 years.
All hope is not lost for Boomers who find themselves solely reliant on Social Security as a primary source of income.
Gunn said a reverse mortgage is not the “dirty word” it used to be. A reverse mortgage uses a home’s equity as collateral to provide cash to the borrower without a monthly mortgage payment, turning a person’s home into a source of income. They are offered to those eligible to withdraw Social Security.
In the past, reverse mortgages were unpopular due to their high fees and interest rates, as well as the likelihood a borrower’s heirs would not inherit the property upon the borrower’s death. But Gunn said these programs have changed for the better, and there are now ways to use a reverse mortgage to your favor.
Today’s reverse mortgages offer the chance to use the equity acquired over the years, which is often the main reason for buying a house in the first place. Following the financial crisis, borrowers are finding it’s more difficult to draw on the equity without a source of income. Adjustments to the reverse mortgage programs have made it more likely for homeowners to maintain their lifestyle after retirement, and even will their property to heirs.
Children of Boomers are expected to work even longer into retirement age, without relying on support from Social Security decades from now. Many believe the program will no longer be solvent at the time they would hope to draw from it. Gunn believes these future retirees will turn to self-directed funds or some form of insurance to cover expenses once they stop working.
John Cunnison believes Social Security will still be available for future generations. As a senior portfolio manager for Baker Boyer Bank based in Walla Walla, Cunnison suggested, “Minor tweaks could have major impact in the system’s solvency over the next 30 to 50 years.”
Cunnison can run financial plans for clients that factor in the prospect of a retirement with Social Security income, or without. He said most Boomers he works with are not solely reliant on Social Security and have some outside assets, which is why they seek financial advice.
It’s the form of advice Chick never received when he first started working in TV news in 1975, with an annual salary of $8,500. More than 40 years later, he said he’s comfortable relying on his Social Security contributions for the income he lives on today.
“I probably spend more money on my cats at the grocery store than I do on myself,” he said.
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