Boomers, Demographics, and Certain Financial Doom in Retirement

I was talking with some retail stock brokers last weekend and they were telling me about their Boomer (born 1946-1959) clients and the clients’ retirement plans.  To wit:  clients believe they can retire on Social Security and $125,000 in savings.  (The latter number is especially interesting since most brokers won’t take clients without $125,000 minimum.?  Less you believe my friends are in a bubble, USA Today Snapshots, April 13, 2012, presented a poll which showed that 65% of those not retired predicted that the major source of income in retirement would be social security, followed by pension, 44%, personal savings 40%, 401(k) 28% and IRA 23%.  mercifully, the note at the bottom said multiple responses were allowed.  Still, it’s enough to provoke a cold sweat.

boomers retirement

If you are a Boomer or know any — which you can’t help but do — you know that Boomers need two things to be happy:  entertainment and spending money.  The idea that the least frugal group in recent history is going to stop consuming the day they retire and live within their means is absurd and impossible.   They will certainly work full-time longer than any generation but they are going to need post-retirement careers.   Eight-seven percent of thirtysomethings with Boomer parents freely acknowledge that they will be supporting a parent or two when the parents reach 85.  They are saving for this eventuality.

Not all  middle class Boomers are profligate.  Many have lost jobs — one or more — during the Great Recession.  They used their homes as ATM machines to finance college, medical expenses,living expenses, etc.  With financial reckoning over the next hill what will they do?  Here are what individuals tell us.  If you can’t sell the McMansion why not find several other couples/individuals to share expenses?  It would be a hip initial retirement home.  Maybe property values will have rebounded before they need to sell.  How about moving to an apartment and renting the McMansion to a couple with children who lack the proper down payment but covet the schools?  How about designating a period of downsizing and trying to beef up retirement savings for the next few years?

If you’ve always had, done, been what you want these are not attractive choices.  They are real and millions of Boomers will have to consider alternatives not their first choices.  Or, they can gamble that prosperity will return this fall and they will work long enough to save for a decent retirement.  When I said that to the brokers, they ordered another round of drinks.

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