ByANGIE C. MAREK

Standing at his retirement send-off in the middle of a maze of cubicles, Rick Rubinoff, longtime claims adjuster for Allstate, says he knows he's a lucky guy, both for the career he's enjoyed and the pension he's got coming. His mustachioed smile broadens as his boss rattles off a list of his accomplishments. Coworkers pick at slices of cake as they laugh about pranks they played on him decades ago. Others show pictures from the beginning of the Rubinoff era of agents in the field--in bell-bottoms. The honoree himself, a hulking Russophile, speaks in amazement about the company's pension, which will let him live comfortably in retirement--even in his pricey Los Angeles suburb. With 31 years at the insurance giant under his belt, Rubinoff has earned a pension worth almost half of his working salary, along with subsidized insurance from the company health plan. He's not getting the proverbial gold watch, he says, "but, man, they take care of you here."

Still, as generous as the company may be, the mood at this gathering is tinged with anxiety. Some of Rubinoff's coworkers admit they feel far from sure-footed, financially. "How'd you pull it all off, man?" one of them asks, gripping Rubinoff's shoulder. And a few weeks after the party, even the guest of honor no longer sounds so sanguine. His first pension check arrived weeks later than he expected. His health benefit is nice, but who's to say that his premiums won't go through the roof? Rubinoff now checks the stock market five or six times a day, something he never did before retirement loomed, and he finds it unsettling. "Every time someone in the global economy sneezes," Rubinoff says, "the stock market tanks!"

To the millions of workers scraping by with a crash-depleted 401(k), having a pension can seem like the next best thing to a lottery ticket--a paycheck for life, often on top of Social Security. But while most of the public stands in awe of these benefits and some argue that 401(k)s should work more like the pension system, many actual pension holders are quietly becoming casualties of the tough economy. The same crises that threaten so many near retirees--soaring health care costs, unexpected unemployment--can eat into their savings and erode the value of their pension income. And they know all too well how easily companies can change their plans. Of the 607 biggest U.S. companies with pension plans, almost a third--190 in all--have frozen them, up from 45 in 2003, capping the paychecks their retirees will eventually receive. "The world is changing," says Jeff Carbone, a financial adviser in Cornelius, N.C.

And so is the worry level. According to a recent study commissioned by the National Institute on Retirement Security, more than one in three future pensioners doubts his benefits will still exist when he needs them. Countless state and local governments are considering slimming their pensions in the face of unprecedented budget crises. And even if nothing changes, financial advisers say, some pension owners will continue to suffer from a more troubling problem: inexperience with handling their investments, something their 401(k) counterparts have learned to deal with, for better or for worse. Advisers also say that some of them have no sense of how much money they'll need to retire. "How can they even plan," asks Linda Robertson, an adviser who counsels workers for the firm Financial Finesse, "without understanding the basics?"

To be sure, even reduced pensions can offer retirees a huge edge, and much of the damage to the pension edifice could heal once the economy recovers. In the public sector, strong legal barriers and political support may protect many current workers' benefits--even if critics grumble that they're living the luxe life on the taxpayer's dime. And in industries where competition for talent is fierce, like energy and pharmaceuticals, pensions are still generous.

But the pension dilemma adds a wrinkle to the debate over retirement security. After all, if a pension isn't a cure-all, what is?

States on Shaky Ground

Jim Schoenherr--formerly an engineer at the Illinois Department of Transportation--sits on his sun-drenched back porch in Petersburg, Ill., a stone's throw from the town where Abraham Lincoln studied law. A lake stretches into the distance behind the house. And downstairs, he and his wife, Diana, keep some of their favorite indulgences: a hot tub (bought with an inheritance) and Jim's rainbow-colored collection of vintage model trains. Despite those treasures, he says, "The only reason we lock our doors around here is to keep the neighbors from dropping off too many tomatoes."

Jim retired in December 2008, at 54, with a pension that amounts to roughly $60,000 a year. But he quickly discovered his pension didn't go as far as he'd hoped it would, when he was hit in Year One with close to $30,000 in home and car repairs; that experience encouraged him to look for a part-time job. More ominously, Illinois's state retiree program--which pays Jim's pension--has been singled out by The Pew Center on the States as the most underfunded public pension in the country. The state has only 33.5 percent of the money on hand it needs to pay its retired state employees, and legislators, having already cut benefits for new hires, are seriously considering going further. Indeed, an early shot in the budget wars recently flew across the Schoenherrs' bow. Dental insurance, formerly free, is now something they have to pay for, and when Jim went in for a recent tooth cleaning, the dentist required him to pay cash up front--the office didn't believe the state would pay on time.

Illinois is hardly the only state to put retirees' teeth on edge. Pew found that as of fiscal 2009, only 4 states had pensions that were "fully funded," with enough money on hand to pay future benefits. Many states are legally barred from reducing payments to current retirees, but some are breaking that mold. This spring, Colorado reduced cost-of-living increases for more than 90,000 current retirees. And benefits like health insurance often lack the protection that pensions have--making them targets for cuts. In the past year, public-sector retirees have seen their out-of-pocket costs soar in Texas and taken a hit on drug coverage in Idaho. The changes are "extraordinary, and bolder than anything I can remember," says Ron Snell, of the National Conference of State Legislatures, who has been monitoring pensions since the 1980s.

All of this makes the Schoenherrs' dental plan look like small change. Tim Blair, executive secretary of Illinois's State Employees' Retirement System, acknowledges that cuts in benefits have affected some of the 45,000 retirees his association covers but points out that many retirees pay no co-pays for health insurance. Still, the Schoenherrs aren't taking anything for granted. Standing in the parking lot of Abe Lincoln's Log Cabin Village after a hike, Diana says she has "no idea" when she'll get to retire from teaching high school English. "You start to wonder," she says, "what are they going to take away next?"

Pensions Alone: Not Enough

Naomi Stentson has the same job as her friend and former coworker Rubinoff--and she's been at Allstate even longer. At 61, with almost 40 years' tenure, her pension is a generous one. But having had that cushion, she hasn't taken many other steps to secure her retirement. She tapped her 401(k) to buy her first home, for example. And her family is carrying hefty credit card balances. "My husband, bless his heart, is a clothes horse," Stentson says, in the soothing tone she's famous for with coworkers. In hindsight, she says, she can see her financial decision making hasn't been sharp. "If I could do it over," she admits, "we would've saved more."

Most pension holders need to be serious savers to make their retirements secure. Headlines may focus on the seven-figure pensions of CEOs, but the typical paycheck adds up to far less than settle-on-the-Riviera money: According to the National Institute on Retirement Security, the average pension benefit is $18,198 a year. And financial counselor Robertson, who teaches financial literacy to workers with and without pensions, says the majority of pensioners she sees haven't calculated how much income they'll need in later years and how much of that their pension might cover. What's more, in many cases, those who are saving aren't allocating those savings very well. Classic investing strategy calls for savers to have at least some exposure to stocks in the years prior to retirement, and those with pensions can afford to take on more stock-market risk. But Robertson says many pension holders are very conservative--concentrating their other savings in stable value or money-market funds with low returns. Many are simply cautious by nature, she says, but some simply don't understand the market.

Of course, many pension beneficiaries have more financial savvy. Experts point out that employees who draw pensions from big-name companies are more likely to have access to investing education on the job. Carbone, the North Carolina adviser, says many of his pension clients (including employees of Philip Morris and Duke Energy) seem particularly proficient. Even so, he says, "I definitely sometimes see clueless folks come through my door."

For now Stentson feels closer to that end of the spectrum. She and her husband, Eugene (who also has a pension), never had to learn much about finances or investments--unlike consumers thrown into the deep end with 401(k)s. When the financial crisis hit, Stentson says, "I just prayed on it and hoped everything would be fine." It was around then that she decided to sign on with a financial adviser, to see if she could afford to retire. The adviser's answer: Not until those credit card bills get paid.

Neighbors Turn Nasty

Dan Kulinski, a retired welfare administrator from Erie County, N.Y., says with a laugh that he "never had a K402, or whatever you call those things." Fortunately, he and his wife, Elaine, get by with the help of his pension--and they'd like to keep it that way. Kulinski is active in the Retired Public Employees Association, and last winter he wrote a letter to The Buffalo News, urging local officials to protect pensions like his. When it was published, his 188-word missive provoked a tsunami of retorts, online and in person. "I've never been called more nasty names in my life!" he says. Among the critics: his 21-year-old grandson, Ryan Frechette, who said it was shocking that Grandpa was paid not to work. And one of his uncles, laid off long ago from a factory job, turned downright hostile. "He called me up," Kulinski says, "and said, 'Where were you when the steel mills closed?'"

Kulinski is one of many retirees caught in the verbal crossfire over public-sector pensions. With their finances under strain, governments are slashing budgets for schools and law enforcement even as pensions go untouched. In Erie County, which pays for Kulinski's health benefits, the local government is cutting maintenance staff and raising property taxes. New York state, which pays his pension, saw its retirement-benefits tab rise to $7.2 billion in 2009, up from $4.2 billion in 2001. Michael Fitzgerald, executive director of the Retired Public Employees Association in New York, says many of his members have faced testy confrontations with neighbors: "The hostility is just intense."

At home in Cheektowaga, a modest suburb of Buffalo, Kulinski says he's as opposed as anybody to abuse of the pension system. The round-faced 71-year-old leafs through a list of the 25 retirees who collect the largest pensions in the state, several topping $200,000 a year. Kulinski's own pension is worth about $26,000 annually, and he scoffs at the idea that he's bankrupting his peers. He retired 15 years ago but struggled to make ends meet before he qualified for Social Security: "I scraped by," he says, "because I won $15,000 in the state lottery." Today he and Elaine are in better shape; they can afford little luxuries, like group bus vacations to Nova Scotia and Myrtle Beach, or the diminutive Smart Car they bought for short local trips.

But when Kulinski hears about the envy of some of his neighbors, he sees what many pensioners see--a disconnect between pensions' glitzy reputation and the murkier reality. He is living in the same house he bought for $17,500 in 1970. And he's sharing it with Frechette, who lives there rent-free. The two still have spirited arguments about whether public workers get too much retirement pay. "I know when I retire," Frechette says, the retirement age "is going to be a lot higher!" Kulinski just shakes his head in dismay. In the eyes of the public, he says, "we've all become the bad guys, the fat cats." e