Sunday, February 24, 2013

Don't Weep for Boomers Close to Retirement

Near Retirement Age Population in the Health and Retirement Study?” The inflation–adjusted wealth of people nearing retirement—those ages 53 to 58 in 2006—declined overall by a modest 2.8 percent by 2010, calculates economist Alan Gustman of Dartmouth University, Thomas Steinmeier, economist at Texas Tech University, and Nahid Tabatabai, research associate at Dartmouth. The change in the wealth of median households was 4.3 percent—from $649,000 to $621,000. “We thought the early boomers would be an enormously vulnerable group,” says Gustman. “So we looked back and the answer was: not much happened.”
The more modest wealth reduction becomes apparent when a broad financial picture of the group nearing retirement is drawn. Their figures include the present value of projected lifetime Social Security benefits; defined benefit pensions and defined contribution plans such as the 401(k); the value of a primary home, net of mortgage debt; the worth of other real estate, mostly vacation homes; business assets; vehicles; financial assets such as stock holdings; and IRAs. (The researchers excluded the top 1 percent and bottom 1 percent of households.) Among the intriguing findings is how early boomer homeowners in their database had sufficient equity in their homes so that a mere 5 percent fell into negative housing wealth after the housing bubble burst.
Although this is one study, however carefully constructed, the results reflect comparable insights from other academic studies. Barbara Butrica and Karen Smith, research associates at the Urban Institute, and Howard Iams, senior research adviser to the Social Security Administration, examined how retirement income at age 67 (PDF) is likely to change for boomers and generation X. Their model takes into account projections of Social Security benefits, pension income, asset income, marital changes, health status, and the like. The authors look at the replacement rate—how much of their preretirement income retired households replace. They estimate the share of early boomer households replacing less than 100 percent of preretirement income at 57 percent. Not good. However, most experts assume retirees need only 75 percent to 85 percent of that income to maintain their standard of living before retirement. By this metric, the share drops from 57 percent to 39 percent. Better.
The wealth of leading-edge boomers should also enjoy welcome tailwinds over the next several years. Retirement account balances at the end of 2012, at $9.5 trillion, were 9 percent above their peak value in 2001, although down 1 percent when adjusted for inflation, according to the Urban Institute. The stronger stock market is likely to boost those values. Home property values are on the mend, with sales up and inventories down. The median price of existing homes in January was $173,600, up 12.3 percent from the same time last year. The labor market is improving.
Put it this way: A majority of boomers seem to be on a reasonable path toward retirement. Yes, many—perhaps a third—will find that it pays to earn a paycheck for a few extra years, hardly an unrealistic expectation consideringtoday’s 65 year-old has the same mortality and health as a 54 year-old did in 1947. The combination of accumulated wealth, additional savings, and working longer means many leading-edge boomers, as well as the younger members of the generation following them, won’t retire penniless. The future is brighter than the searing experience of recent years would suggest.
Not for everybody, though. A group of aging boomers is vulnerable in our increasingly unequal society. High school dropouts. High school-only graduates. Single moms. African-Americans. People who worked in low-wage jobs without benefits. “It’s also a well-established fact that the individuals most at risk in retirement are those who have an economically difficult working life—namely, households with very low incomes,” writes Steve Utkus, head of the Vanguard Center for Retirement Research, on his blog.


  1. Well, that is certainly a rosy-sounding article. Except I couldn't help but read the last line in the fourth paragraph:

    "The labor market is improving."

    Sorry, but that line takes out the credibility of the entire story.

  2. The ones who aren't doing so well? They're part of the cull. Not everybody gets to survive. The penalty for stupidity is early death. Your life does not count to society. I wonder whether a lot of peoples' lives even count to themselves. Maybe that's because I work around a lot of suicidal people.

  3. Bukko--Do you think suicide rates change with economic realities? What about all the new drugs that are handed out like candy?

    I am surprised that so many people take anything the dr. hands them when they listen to the side effects.

    As a dear friend had her son commit suicide at 48, I'll admit to some bias. Now he'd tried to slash his wrists in college. He was into music (and, trust me, anyone in the artistic realm deals with rejection on a daily basis. Why do you think so many artists, writers, singers, actors, etc. have so many drink, drug, psychological problems?)

    I can attest that the daily rejection letters do a number on your psyche!

    That said, there seems to be an absence of HOPE that abounds in the lives of those who contemplate such a tragedy. The other thing that I've noticed is that many times such people DO NOT SLEEP. Most people don't realize that sleeping is vital to humans. As pressure mounts to survive, I would guess that sleep would be difficult as your mind reviews your situation over and over.

    Also, how many seniors actually do commit suicide and have it covered up? They take one too many pills. There are ways to use 'weapons' such as a car, unfortunately , that seem to be 'accidental' when, in fact, it is a suicide. Giving up driving seems to be the last bastion of independence.

    I think a lot of seniors work simply to have something to fill the hours. Not just for financial reasons. I wonder what will happen as boomers retire only to learn that some of their benefits WILL be cut (it is a simple hypothesis based on the budget. Eventually, even granny will have Social Security means tested---as will the veterans, etc. When Boomers have to live without their 'summer' houses and long vacations, I predict they will be very unhappy and whiny...just like 2=yr.-olds in need of a nap.

  4. Quote of the day:
    "The helping hand which so many people are expecting to be given to them - is actually at the end of their own arm."

  5. So, the link to THE BIG PICTURE leads to a bit on: "Are Boomers Too Cautious About Stocks" and begs the question (overtly) that this caution 'may' lead to them outliving their money.

    Funny, that. How come no broker ever says anything when the market TANKS and they LOSE all their money.

    Just wondering.....

    I am so out of touch that when the dentist asked me if I watched the Oscars, I told him the truth---"I don't even watch most of the movies." You think Wall St. is narcissistic? I'd rather have a root canal than be forced to sit through the Oscars......

  6. Mammoth from a while back I posted a story about Darden Restaurants who own the Red Lobster and many other chains. I think it was in October and they were going to cut FT employees to part time. Then I found this today and changed course.
    Darden Restaurants Says It Won't Bump Full-Time Workers To Part-Time Status After Negative Publicity

  7. Do enjoy your Red Lobster dining and Olive Garden, Longhorn Steaks, Bahama Breeze etc. Sometimes bad publicity can get stupid execs to change course and do the right thing.

  8. Bukko having been to skilling nursing facilities many times I wish that we could let these poor souls die. My Dad is gone as far as I am concerned now separated from Mom as she lives alone in the independent living section. I can visit him, but there is only a glimmer of recognition. No cognitive thought. Once I leave he will forget I was even there. Medical science has extended life too long for many and the cost is enormous.

    I remember Edward G Robinson choosing to walk into a place that looked like a hospital in Soylent Green. Their he was able to choose his own death with dignity. Today so many fight to stay alive at all costs regardless of their beliefs. I have no such intentions.

  9. Looks like the BTFD is in full swing with PMs.

  10. Queen--the question that springs to my mind is WHO is keeping these folk alive? Medicine? Doctors? The people themselves?

    My doctor thinks I am 'funny' when I tell him that I don't WANT to be 97 and drooling in a wheelchair. They press pills and potions on us to "lower this; fix that."

    It all goes back to that accountability/responsibility thing. We are going to get free medical care BUT there are going to be restrictions. I don't think anyone should be starved or lack water...but I remember a doctor telling me that by feeding my mother I was only feeding the cancer. He was correct but I couldn't face being the one to STARVE her, either. Thankfully, nature takes it course in that situation. And, I was blessed to be friends with nurses who advised me that in her state the end wasn't far off. I had a father with Parkinson's that medicine would allow to do IV therapy and he worried that the money would run out.

    You and I know and have found that most doctors are NOT realists. They are taught to heal and they won't give up. It is like a personal affront to them to admit they 'don't know' something. You have to go behind them to the nurses to get a better idea. AND you have to press and be pretty much the wicked B*tch.

    As the advocate for my hubby with Parkinson's, I am NOT taking any back seat. I run this show. I live with the man and have for 40 years. Don't tell me you guys know him better. And I witness the side effects. Plus, I do the reading (both online and in medical journals.) Most people don't WANT to know or deal with reality. They are happy to let the doctors manipulate them and treat their loved ones like guinea pigs.

    I'm with you...even with my religious beliefs. I want detailed instructions followed. I believe in miracles BUT I also believe there are limits and a real difference between keeping someone alive PAST their time and healing. Hopefully, more and more people will take the time to make their end-time wishes known...

  11. Course, with all that above said, the idea that after numerous calls, written documentation, etc. the government still can't figure out we've been married 40 years and adjust the paperwork does NOT give me a good feeling about how they will handle health care....

  12. Everyone should have a living will.

  13. Amen. AND a real will, as well. But you'd be amazed at how many won't make one.

  14. "“It’s also a well-established fact that the individuals most at risk in retirement are those who have an economically difficult working life—namely, households with very low incomes,” writes Steve Utkus, head of the Vanguard Center for Retirement Research, on his blog."

    Thank you, Dr Obvious. Duh. Who could have known.

    "The labor market is improving." Yes, the job market is heading north in a southerly direction.

    LOL @ the MSM "analysis".

  15. Hey aside from the obvious stupidity of this article we had some great comments.