OK, I’m Officially Depressed
July 08, 2011Wow. I don’t think I want to read financial news stories for a while now. This is one of those times I wish I were older. What am I talking about? This article talks about how many Baby Boomers and Gen X’ers are “at risk” where retirement income is concerned. The numbers get worse with each successive younger generation, and with each passing year. Here are some numbers (I know, who comes to a financial blog to see numbers…).
| 2004 | 2007 | 2009 | |
| All (At Risk) | 43% | 44% | 51% |
| Early Boomers | 35% | 37% | 41% |
| Late Boomers | 44% | 43% | 48% |
| Gen X’ers | 49% | 49% | 56% |
I’d hate to see the numbers for my kids’ generation!
Here are the factors that are making each generation’s retirement income increasingly at risk.
1. We’re all living longer, so our assets have to last longer or we’ll have to have significantly more saved than prior generations.
2. Fixed & secure sources of income are shrinking. Pensions are being eliminated or frozen and far fewer of us will be able to count on a pension during retirement. How many people feel that Social Security benefits are going to remain as generous as they are today? Increasing the “full retirement” age, lowering the cost of living adjustment, means-testing the benefits, and taxing a greater portion of the benefit are all options that politicians have discussed when debating how to keep the Social Security system solvent. (Say that 3 times fast!)
3. Out of pocket health care costs are going in one direction. Up. How much do we need to save in order to feel secure that there’s enough to cover our health care costs? I don’t have a great answer for that question right now.
4. Investment returns have declined and are rather unpredictable. Until recently, you could always look at the 10 year record of stocks (using a broad market index like the S&P 500 or the Dow Jones Industrial Index) and point out there had not been a 10-year period where returns were negative since the Great Depression. Now, there are several. Have you seen savings account rates, lately? CD’s anyone? The 10 year Treasury is under 3% and the 20 year is under 4%. Investment returns have been in decline, and there is not a lot of optimism about a return to 10%+ returns imminently.
Are you as depressed as I am after reading that? So, what do we do about this situation? Check back next Friday and we’ll talk about that….