THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, August 7, 1995 TAG: 9508040019
SECTION: FRONT PAGE: A6 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 53 lines
When Procter & Gamble Co. sold its pulp plant in Perry, Fla., in 1993, 1,000 workers were ejected from the company's retirement plan. For retirement money, they got a total of $50 million in P&G stock.
Many workers received more than $100,000 worth, The Wall Street Journal reported last week. What they did with the sudden wealth should be cause for national concern.
``The wives are driving white Lincolns,'' one retiree said, ``and the guys are driving pickups with toolboxes in the back.'' Local new-vehicle registrations in the town of 7,200 leaped 45 percent that year.
In other words, many of the retirees treated the P&G stock not as retirement money to be rolled over into Individual Retirement Accounts and prudently invested but as a windfall with which to have a heck of a good time.
More and more often, even workers in traditional monthly-check-for-life pension programs are being offered retirement lump sums. By the end of the decade, experts predict, half of the old-style pensions will be distributed as lump sums. Companies find it cheaper to pay a lump sum than to administer monthly retirement checks and contribute to the government's Pension Benefit Guaranty Corp.
A Labor Department study of how 60,000 households handled retirement-plan lump sums showed only 21 percent rolled the money into IRAs. Nearly 30 percent bought consumer products or paid medical, educational or other expenses. Twenty-three percent put the money into a business or house or repaid debt.
When a retiree receives a lump sum, he or she is in the same boat as the person whose retiree funds are in a 401(k) plan. For better or worse, the retiree makes the financial decisions that may determine whether retirement is sweet or bitter.
The Wall Street Journal article told of Robert Watlington, who retired early from United Parcel Service and used his $150,000 in company retirement money to open a Mailboxes Etc. franchise in Phoenix in 1985. By 1992, his store was bankrupt. His car was repossessed, his house in foreclosure. Watlington shot and killed himself. His wife moved in with her son. She lives on a veteran's pension of a little more than $400 a month.
Here's a point most Americans fail to grasp: A dollar prudently invested grows and grows and grows. A dollar spent is gone.
A retirement dollar spent really is more than a dollar spent. It is all the dollars that first dollar might have earned, if invested.
We are a nation of grasshoppers, and winter is near. by CNB