Guaranteed employment, pensions, medical coverage? Probably not, kids!

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In chatting with a man who is the maintenance guy for a small insurance company with its own building, he mentioned in passing to me that he had been planning on retiring this Winter. But the events of the last few months have erased $50,000 from his 401K plan. He will not be retiring for a while.

The next generation had best watch out. Now that employers have adopted "Employment at Will" as their human resources philosophy ("You can quit any time you want without notice; we can fire you at any time we want, without notice"), eliminated company pension plans and started cutting back on medical insurance, they are gaining freedom from that liability called "employees."

In the turmoil of the global financial crisis, nearly everyone is hurting. While the woes of financial companies and investment banks have been well-publicized, Robert Lyle points out that there's one especially hard-hit group which almost no one is noticing — the first generation of 401(k) retirees.

When my long-time employer ended its regular — defined-benefit — retirement plan back in the early 1990s, the company rolled out the then-still-new 401 investment funds. As a senior financial correspondent, I thought: "What a great idea." I was sure I could do better than the old guaranteed pension.

Ups and downs

And for a decade or so, I did. Even with the occasional

A warning to the next generation: If you think you'll be able to rely on the market alone to protect your retirement savings, you'll be in even worse peril than are we.

market blips along the way, our retirement savings grew faster than we could ever have hoped for with a fixed pension. When I retired from that company in 2000, I thought we had secured our retirement.

Hah! We, this first generation of 401 retirees, were in no way prepared for this tsunami of a financial crisis. While it has been noted that trillions of dollars in 401 retirement plans disappeared in a couple of days, stories only focused on the people still working — that they'll have to stay at it longer to rebuild those funds.

Making do with less

But what about those who are out of the labor market?

No one noticed that for those of us already retired and living on 401 investments, this was not just a severe loss of value — this was catastrophe. A wipeout. There is no time to rebuild the value of those investments for us — we have to worry about next month's bills.

Without 401 value, the very foundation of our existence has disappeared. Suddenly, our income has dropped nearly 70%. How can we now afford our mortgages or to pay the real estate taxes which are still based on inflated values? How do we buy gasoline or anything else?

Back to work

Yes, thank goodness we still have Social Security. We won't starve.

We, this first generation of 401 retirees, were in no way prepared for this tsunami of a financial crisis.

But since our retirements were based on our 401 savings being the main source of income — making up the difference between Social Security and the cost of living — we're now out in the cold. Many of us could now lose our homes, not because of dodgy mortgages but merely because our income has dried up.

For most of this lost pension generation it means we must go back to work — if there are any jobs left. I've never really stopped working, but now it has to be to make a living again.

Word of warning

We'll get through it. But it must serve as a warning to the next generation. If you think you'll be able to rely on the market alone to protect your retirement savings, you'll be in even worse peril than are we. Globalist