THE STAR SPANGLED RETIREMENT DREAM

The author of Pay Now, Die Later (1966), which took the life-insurance industry to task, now turns his sights--with the same good humor and steady aim--on the American pension system. And, unlike recent others, he is concerned as much with private pension plans as with public retirement programs. First, Gollin traces the history of pensions--originally restricted ""to a select few for extraordinary service to the state""; later used by the British army to induce old warhorses to fade away; adopted by American private industry--after the establishment (1935) of Social Security--only when the WW II wage freeze made fringe benefits an effective recruiting tool. Currently, retirement programs are big business for actuaries, accountants, attorneys, money-managers, compensation consultants, etc. Having interviewed scores of authorities, Gollin comments wryly: ""Like the exact whereabouts of an electron in physics, the cost of a pension plan is one of those bemusing facts that can only be known in retrospect."" Actuaries, it develops, are usually willing to tailor liability assumptions to fit corporate clients' needs to report gains in per-share earnings. And professional investment advisors have been largely unsuccessful in bridging the resultant gaps: the top total return of pension plans during 1961-78 was a meager 6.5 percent in 1968--close to the end of Wall Street's go-go years. Further, the 1974 Employee Retirement Income Security Act, a reform measure, had un-wished-for consequences: one-quarter of the existing private plans were terminated. Meanwhile, the Social Security system has been hit by widely publicized cash-flow problems--which Gollin attributes to a departure from the prudent actuarial assumptions of level national income that produced surpluses through 1972 (an election year) when Congress greatly expanded benefits. The higher payroll taxes now in effect, he points out, should shortly balance the books; but longer-term demographic trends might necessitate additional fixes and/or increased imposts. A final alert: the typically generous retirement programs for government workers may be in deepest trouble; at the end of 1977, the Federal Civil Service Retirement System has an unfunded liability of $107 billion. Overall, though, Gollin's text is less an apocalyptic exposÉ than a cautionary analysis--with ample supporting evidence.