BABY BOOMERS

Were you born between 1946 and 1964, inclusive? If so, you are a proud member of the Baby Boomer generation, a generation that has, in my opinion, generated more interest and speculation than any other in my lifetime. In many ways, it has set the standard for all the generations that follow, both positively (longer lifespan, better health, higher standard of living) and negatively (as you will see below). (Full disclosure: Technically, as my wife keeps reminding me, I am not a member of this exalted group having been born in 1945, but I have always identified with them. So, let’s call me an honorary member.)

Currently, BBs number 79 million persons, which includes about 7 million immigrants. For you “nitpickers,” there were 76 million births between 1946 and 1964, inclusive. Subtract the 4 million that have passed away, add the 7 million immigrants and you get 79 million. BBs comprise about 25% of the total US population of 314 million. Yet, they control about 2/3 of the nation’s wealth.

The origin of the name baby boomer is that after WWII returning veterans were eager to get on with their lives: get married, establish careers and start a family. As a result, the annual birth rate, which had been around 2.8 million or less, rose to a peak of 4.3 million annually from 1957 – 1961. BBs have had a profound affect on the country as a whole at every stage of their lives – demand for houses, public schools, colleges, jobs, vacation homes, and health services to name a few examples. If nothing else, their sheer size has and will continue to have a profound impact on the rest of the population. And now, on the cusp of retirement, they face new challenges.

1. Longer life – BBs will live longer than previous generations. In fact, many seniors will be retired longer than they were employed. Think about that. That’s great as far as it goes, but that also means that BBs will have to finance their retirement for up to 30 years. Statistically, a married couple of 65 has to plan that one of them will live at least to age 90. The trick is to manage one’s finances so that you can live comfortably, but not to outlive your money. This will take a level of financial sophistication that is far beyond many seniors, and accounts for the disturbingly high number of frauds perpetrated on seniors by unscrupulous financial advisors. These people prey upon seniors who are desperate to increase their return on investment not cognizant of the increased risk involved.

2. Decline of pensions. In the last 20 years or so, employers have trended away from defined benefit pensions (that provided a fixed payment). Instead, it has become the individual’s responsibility to squirrel away enough money for retirement in his or her 401k and IRA. How is this significant? Let’s say, for example, a retiree is receiving a pension of $100,000 annually under a defined benefit pension. Given the current rates of return on prudent investments suitable for seniors, it has been my experience that one would need about $2 million in investments to generate that amount of income consistently. Yes, it requires a very diligent and astute saver to accumulate enough for a comfortable retirement. Unfortunately, it has been well established that the typical BB is a poor saver, whether out of choice or necessity.

3. Social security – Social security was not meant to constitute the major portion of retirement income. It originated in the 1930s to alleviate poverty among seniors during the Great Depression, which had exceeded 50%. At the time, only a very small percentage of people lived beyond 65. With the current cost of living, it is still no more than a safety net. It is well known that the SS Trust Fund is projected to run out of money within the next 30 years or so, unless changes are made. There have been various proposals, but the point is prospective retires would be well advised to save on their own. There are no easy solutions, only hard choices, which have become more onerous because our political leaders on both sides of the aisle have delayed taking action for too long.

4. Postponing/redefining retirement – Many BBs will not be able to retire when they had planned and in the style they had hoped. Others, who have been laid off or discover that they retired prematurely will be forced to take low-paying or part time jobs to make ends meet. Unfortunately, this sector of the job market is overcrowded with others all competing for the same jobs – other seniors, college students, teenagers and the general unemployed. According to a recent AARP survey 70% of persons aged 45-70 expect to have to work during their “retirement.”

4. Other concerns –

a. Many BBs have become “sandwiched” between caring for elderly parents and supporting adult children who cannot find a job. In some cases, the children have children of their own, which means that there could be up to four generations living in the same home with all the attendant financial, emotional and social stress.

b. It is no surprise that surveys indicate that BBs are currently one of the most pessimistic, anxiety-ridden and stressed-out age group.

c. The poor economy is a major concern. It has been permeating and exacerbating all of the above issues and shows little or no prospect of improving significantly.

CONCLUSION AND PREDICTION

As a result of the foregoing, as is frequently the case, it is the poor and disadvantaged who will likely suffer the most. Wealthy, sophisticated and intelligent people will generally be able to adapt and fend for themselves.

There are no easy choices, no magic bullets. For the most part, BBs will have to deal with these issues on their own. However, I would caution the younger generations to take heed. Learn from the mistakes of your elders. Plan for your own retirement well ahead of time. Develop a plan, either on your own or with the assistance of a trusted professional, and stick to it. Good luck.