who will pay for the Boomers' retirement -- and are they entitled?

[grapejelly]

The Boomers are starting to retire.

(I am a later Boomer myself, but I wouldn't think of retiring except perhaps at my funeral but that is just an aside so you know my perspective.)

From 2010 onwards, peaking somewhere around 2025 I think, the Boomers will be the most enormous cohort ever seen that will be expecting to have a nice income, not have to work, get medical care and all of this good stuff.

So we have:

* Higher medical costs

* Only two earners paying for every person on social "security"

* Slower consumer spending (as the major
consumers are in the years when they cut back)

* Expectations that their investments will
make up the shortfall in income between what they get
in social security and what they want to live on.


Question is, what will happen? Will the young people be willing to shoulder this enormous burden?

I doubt it.

Barring some amazing technological breakthrough (and this is very possible so I don't want to dismiss it), the stocks and bonds that the Boomers are "putting away for their retirement" won't give the yield that the Boomers are hoping for.

The reason is this: when you invest in securities and hold them, you have a claim on a future stream of income. But you don't have that stream of income. You just have a claim on it. In the present world, the people have to produce that income in order to be able to provide it to those who hold these claims.

Why should the young people today be happy seeing most of their earnings flow to the Boomers? It ain't going to happen.

We're talking $40 trillion dollars here. Maybe more. I'm not the detail guy. I know we're talking a lot of money, multiples of the biggest country's annual GDP.

More than likely, inflation will reduce the value of this stream of earnings to near zero and the Boomers will have to keep working and won't be able to "retire." In nominal currency they'll get their return. In real terms it ain't gonna be worth dog food

What do you think?

[jk]

Re: who will pay for the Boomers' retirement -- and are they entitled?

i'm an early boomer, and i never expected social security to be there when i got old enough for it to matter. now i think it will be there, at least for my cohort, but will be inflation adjusted by a bogus cpi, so it will soon be meaningless in any event.

[hoodoo]

Re: who will pay for the Boomers' retirement -- and are they entitled?

Hi,

Just a pointer to a yet-to-be-completed series that may be of interest.

http://the-great-retirement-experime.../pamphlets.htm

Cheers,

Cory

[Harry Pottery]

Re: who will pay for the Boomers' retirement -- and are they entitled?

There is no way the boomers will cash out their assets at current value. There just isn't any way. And I don't think they are going to get a lot of sympathy from younger generations.

As for health care costs, those are going to wipe out a lot of boomers--those open heart surgeries aren't cheap. And, again, I don't see a lot of sympathy from the young here either, since a larger portion of young people don't even have health insurance at all.

I think a lot of young people feel like the boomers created this whole big mess, especially on the insurance/health care front. Education costs, housing, drug costs, all of it. There really isn't going to be a lot of sympathy.

[renewable]

Re: who will pay for the Boomers' retirement -- and are they entitled?

The Boomers have spent their whole lives paying taxes towards their retirement, so perhaps they are entitled.

Maybe a more interesting question would be whether the Boomers are a testament to the futility of paying anything to the government towards your retirement - They spent their entire lives paying the government retirement taxes and are not really assured anything. Perhaps they are a big warning sign to future generations not to entrust the government with your retirement provisions?

[rj1]

Re: who will pay for the Boomers' retirement -- and are they entitled?

It will be a combination of my generation paying (I'm 24) with the understanding that we won't get anything for ourselves when we turn 65, and boomers will not receive everything they were told they would receive.

If you don't like it, tough, move to Mexico. I'll vote for the first politician that calls for Social Security to be dissolved. Sorry if that hurts older people, but I have to look out for myself.

I started this discussion on a university message board of sorts in response to an article on how French twentysomethings felt they were getting the shaft due to the actions of their parents and grandparents in businees and politics. Click below if you're interested in reading some of the younger generation's points of view.

http://www.brentroad.com/message_top...x?topic=465113

[grapejelly]

Re: who will pay for the Boomers' retirement -- and are they entitled?

It will be a combination of my generation paying (I'm 24) with the understanding that we won't get anything for ourselves when we turn 65, and boomers will not receive everything they were told they would receive.

[/quote]

I think there will be a massive default and the current system will be dead anyway. It's just a matter of when. So I don't worry about this so much. So what if people have to work past "retirement age"? It is a good thing to work in any event.

[DemonD]

Re: who will pay for the Boomers' retirement -- and are they entitled?

As for health care costs, those are going to wipe out a lot of boomers--those open heart surgeries aren't cheap. And, again, I don't see a lot of sympathy from the young here either, since a larger portion of young people don't even have health insurance at all.

Expensive healthcare for the post-working career and pre-medicare gap coverage will be a combination of many things, but likely will involve outsourcing.

http://www.bumrungrad.com/thailand-hospital/


This is already happening and has been happening for a few years now.

[grapejelly]

Re: who will pay for the Boomers' retirement -- and are they entitled?

http://www.financialsense.com/fsu/ed...2007/0424.html

Around fifty million Baby Boomers are planning on eating nice slices of a really big investment pie at some point down the road. Not just all the people who buy stocks and other investments directly, but all those who buy through their retirement accounts, and indeed, anyone who is planning on getting a pension as part of their retirement. The problem is that when we add up all the different expectations for our future pieces of Investment Pie, and compare them to what the total Economic Pie is likely to be – there just isn’t enough pie to go around. An individual can certainly earn a particularly fat slice of the pie, so long as they follow an investment strategy that works out very well indeed. As many investors have in the past. However, how can everybody who follows the conventional investment strategies all earn those big slices simultaneously? How can one sixth of the entire population simultaneously have their real worth increase 18 times faster (1,645/92) than the real per capita worth of the nation itself?
It looks like we have a problem. The amount of real wealth in terms of resources, is growing far, far slower than people’s perceptions of their current and future wealth, as valued by their investment portfolios. We have a huge group of people planning on actually selling those investment portfolios to get real resources, at the same time, year after year. How do we make it all add up?
The simple answer is: they can earn that wealth on paper, but when it comes to real resources, they can’t cash it out. A pie, or an economy, is made up of the sum of its slices. When most of the people are all expecting their own slices to grow far faster than we know the overall pie is growing – an awful lot of people are likely to be very disappointed.

I liken it to everyone in our neighborhood wanting to sell their houses at exactly the same time...

and also this gem:

Another way of illustrating this is to look at one example, and we will use the example of Duluth, Minnesota, a city of 87,000 in Northern Minnesota, located on a hillside above Lake Superior. In 1983, Duluth had a problem with city unions wanting more money than was available in the budget, and voters who didn’t want a tax increase. So the mayor just promised the city workers (and their spouses and minor children) free health care for life, instead of spending a couple hundred thousand to give the employees the raise they wanted. Free money as far as the mayor was concerned, because there was no need to account for such promises under governmental accounting standards, and the real expenses were still a generation away, which means they didn’t exist politically speaking. Fast forward to 2005 and with rapidly building retiree health care benefits, the city finally gets around to calculating the expected cost of that health care promise – and per the official city study, it turns out to be $280 million. Whoops.

[friendly_jacek]

Re: who will pay for the Boomers' retirement -- and are they entitled?

How can one sixth of the entire population simultaneously have their real worth increase 18 times faster (1,645/92) than the real per capita worth of the nation itself?

Simple, the 1645% is not real worth as it's not adjusted for inflation.
Inflation with be the great equalizer.
Big omission for "a Chartered Financial Analyst with MBA and BSBA degrees in finance, and almost 25 years of professional experience."

[grapejelly]

Re: who will pay for the Boomers' retirement -- and are they entitled?

Simple, the 1645% is not real worth as it's not adjusted for inflation.
Inflation with be the great equalizer.
Big omission for "a Chartered Financial Analyst with MBA and BSBA degrees in finance, and almost 25 years of professional experience."

Yes, the purchasing power of those future dollars will be a fraction of what it is today and that is exactly the point:

That the Boomers are deluding themselves expecting compound interest and "the market" to work in their favor and result in a bountiful retirement.

People don't realize that those currently working and productive are the ones who pay for those who "saved for retirement."

[spunky]

Re: who will pay for the Boomers' retirement -- and are they entitled?

The government will find a way to " patch " the system, privatize a part of it and the simply shuffle money from one account to the other. I am a tweener, 40 yrs old : I am planning it not to be there in 20 yrs, and I dont plan on retiring in the US either.

The boomers did make this friggin mess, and God bless my dad he is the only one of his generation I have met that has acknowledged his generations mistakes.

[fightthepower]

Re: who will pay for the Boomers' retirement -- and are they entitled?

i'm an early boomer, and i never expected social security to be there when i got old enough for it to matter. now i think it will be there, at least for my cohort, but will be inflation adjusted by a bogus cpi, so it will soon be meaningless in any event.

Has there ever been a more useless, worthless, greedy, bunch of people in the history of humanity? They started out as a bunch of spoiled brat kids, grew into a bunch of druggie socialists, became a mob of gready capitalists and now will be intent in sucking their kids and grandkids dry so that they can get thier government welfare. They can't die off soon enough.

[bart]

Re: who will pay for the Boomers' retirement -- and are they entitled?

Has there ever been a more useless, worthless, greedy, bunch of people in the history of humanity? They started out as a bunch of spoiled brat kids, grew into a bunch of druggie socialists, became a mob of gready capitalists and now will be intent in sucking their kids and grandkids dry so that they can get thier government welfare. They can't die off soon enough.

Wow!

With that amount of hate and vitriol and outright lies and BS etc., I'll bet it's a joy to live inside your head.

[bart]

Re: who will pay for the Boomers' retirement -- and are they entitled?

The boomers did make this friggin mess, and God bless my dad he is the only one of his generation I have met that has acknowledged his generations mistakes.

You haven't met myself or a great many boomers. I know *very* few boomers who do not feel like your father.

And in the interests of a broader perspective, do consider the world the the prior (Greatest) generation left us boomers... and the one that was left to the Greatest generation. This is not a new story.