Tag Archives: baby boomers

Baby Boomers are Getting Richer

According to Bloomberg writer Ben Steverman, Baby Boomers – “part of the wealthiest generation in U.S. history” – just keep getting richer.   The Boomers started turning 65 in 2011 and since then the S&P 500 Index is up 91 percent.

That’s fortunate because the worst thing that can happen to a retiree is for his retirement investment portfolio to decline just as he retires and begins dipping into his savings.  If  the market declines as he retires, with no income to replenish his losses, the retiree find himself in a financial hole he may not be able to climb out of.

Older boomers have experienced what is arguably the best-case scenario: The S&P 500 has returned 269 percent since its March 2009 low. As a recent study in the Journal of Financial Planning shows, wealthy retirees can be very cautious about spending down their savings. This instinct, along with the stock market’s new record, suggests that many boomers are likely to end up with far more money than they know what to do with.

Researchers followed the spending and investing behavior of 65- to 70-year-olds from 2000 to 2008. The poorest 40 percent of the survey respondents generally spent more than they earned, according to the study, which was funded by Texas Tech University. Those in the middle were able to keep their spending at about 8 percent below what they could have safely spent from pensions, investments, and Social Security.

The wealthiest fifth, meanwhile, had a gap of as much as 53 percent between their spending and what they could have spent.

For individuals, broad statistical averages like these are not very useful.  As retirement looms, everyone should have a plan that will help them determine what happens if they get lucky and the market goes up, and what they can safely plan to spend if the market goes down.

Contact us for more information.

Tagged , , , , , , ,

One in five Americans dies broke.

A University Michigan study on health and retirement indicates that 20% of Americans age 85 or older died without any assets other than a house.  One in eight (12%) didn’t even have a house and one in ten (10%) died owing money.

It’s the biggest financial worry for anyone saving for retirement: will I outlive my savings and die broke?  Based on surveys repeatedly pointing to dismally low levels of retirement savings, most American households have reason to be concerned.

While my opinion is not based on a survey, but on experience, I believe that this problem is not based on lack of earnings but on other factors.  I would like to highlight two of them.

One of those factors is that many people place saving for retirement low on their order of priority.  There are always other things that seem to be more interesting, or fulfilling, than putting money away for a far distant future.  Earlier generations had less of a social safety net and were more future oriented.  They knew that they had to take care of themselves as they got older or move in with their children.  The government programs that have been put in place over the last 85 years have made the specter of destitution at old age seem less dire.

A second factor is lack of knowledge.  Far too many middle-income income people are either unaware, or afraid, of the traditional ways people have accumulated money for retirement.  Many a family gathering will include a fair number of people who believe that an IRA is something you do with a bank.  Others will tell you that investing is gambling and are deathly afraid of anything having to do with stocks, bonds or mutual funds.

For many retirees, the end of life comes with major medical costs that can wipe out savings.  But others have little savings to begin with.  “Many more people who have very low financial assets at the end of life have been bumping along with low assets through most of their retirement,” he said.  “They just hadn’t saved very much.”

That brings us to Baby Boomers who are either retired or rapidly approaching retirement age.  Recent data shows that 40% have not saved anything and over 20% have less than $100,000 saved.

People in this situation need professional help.  They are not going to make it on their own.  They really need to seek out an advisor, preferably an RIA, who will take them under their wing, educate them, and be willing to work with them before it’s too late.

Tagged , , , , , , , , , , ,

The retirement savings crisis

Banker’s Life commissioned a survey that’s troubling for baby boomers, people aged 50 to 68. The survey says that middle income boomers have saved too little. Only 13 percent have investable assets of $500,000 or more. More than half (54 percent) have less than $100,000, and one-third (34 percent) have assets of less than $25,000.

What does this mean for boomers? Many will have only Social Security income after retirement. Some will also have pensions. And over half expect to continue working after age 65.

This should be a wake-up call for people younger than baby boomers. When boomers entered the work force many of the big companies offered pension plans. That number is fast dwindling. So younger workers will be even more dependent that their elders on their own savings.

Social security is also a problem. The number of workers contributing to the system has been declining relative to those receiving benefits. At some point in the future, benefits will have to be cut or taxes will have to go up to levels that will be politically unsustainable.

The lesson for the children and grandchildren of the baby boomers is to save more and invest wisely. And begin now.

Tagged , , , , , , , , , , , ,
%d bloggers like this: