Will there be a Baby Boomer retirement crisis? - demographers say no way

[papau]

At least we will not have a new crisis. We have always had a "retirement crisis" since the vast majority of retirees have had very low income, and the vast majority have had no health insurance beyond Medicare. Since only a third of Boomers will have saved enough to retire comfortably, working at least part time into ones 70's will become even more common.

http://www.plansponsor.com/magazine_type3?RECORD_ID=32096&page=1

Think the US will soon see a crisis spawned by a huge wave of Baby Boomer retirement? Think again

Conventional wisdom says that the United States nears a retirement crisis, as the giant Baby Boomer generation retires en masse and a smaller generation of young workers struggles to maintain their productivity level and fund Social Security. Conventional wisdom is wrong, demographer David Foot believes.

The idea of a looming retirement crisis "is overblown," says Foot, a professor of economics at the University of Toronto who studies the economic and policy implications of aging populations. “Baby Boomers are an 18-year or 19-year generation, so they will retire over two decades. It is not all going to happen at once,” he says. “We are also living longer, so there is a perception that workers might want to work longer.”

The Baby Boomer birth rate peaked around 1958, he says, so the youngest Americans in the generation are in their late 40s now. “They are probably not going to retire for at least 15 years, and maybe 20 years,” says Foot, who also heads up Footwork Consulting Inc. “The print media and TV media overdramatize things. They give people the idea that a huge wave is coming, and it is just around the corner. It is hardly a ripple, and it is more than a few years away.”

It's been all about the Boomers for so long that their children—the Millennials, Echo Boomers or, as they are sometimes called, “Generation Y”—are frequently overlooked. It’s a generational shift with the potential of major impact for Social Security, jobs, and the nation’s private pension system. Indeed, it now looks likely that we’ll see a younger generation almost as large as the Boomers, or maybe even larger—a generation just beginning to emerge in the workforce. Moreover, given the opportunity, the Boomers themselves will tend to retire gradually, with many continuing to work for years past 65.<snip>

[On the Road]

1. Spending Drops as People Age

people in their 80s don't spend as much as people in their 60s. How much of that is due to financial necessity I don't know.

Part of the scare over the low savings rate is based on misleading data -- apparently the 0% savings rate does not include company savings and pension plans, which are one of the chief vehicles for retiremnt savings. Don't know what the true number is.

On the other hand, for people who don't have a company plan, there is definitely a retirement savings problem. Especially since Social Security is not at all secure for the next generation. I can't believe how many people seem to be oblivious to this need and spend beyond their means.

But maybe it was always so. Elderly poverty is nothing new. And it's usually invisible.

[papau]

2. I agree - the biggest negative to savings now is the Gov deficit -

and we do not seem to be in a hurry to cure that problem.

So while the gov "dis-saves or un-saves", and the rest of us do a little saving, the administration tells us our problem is a low savings rate.

And our media never mentions the deficit when talking about the savings rate.

:-(

[kineneb]

4. retorical question: what if you are 40+ and already poor?

And are not allowed to save by the System. Hubby loses his Medicaid if I earn anything. So savings is not possible. I guess my plan to retire to a Buddhist abbey was not so bad after all.

(not meant to be argumentitive, but not everyone can save for old age)

[raccoon]

10. What a great plan, kineneb! I may give that some thought.

I don't anticipate having a well-heeled retirement either. A modest one, perhaps.

But the idea of retiring to an abbey, getting away from it all,
just like in the Middle Agesis very appealing.

[depakid]

3. plansponser obviously doen't know anything about

healthcare economics- or energy depletion. That was about the most myopic piece I've seen in a long time.

[ticktockman]

5. Baby Boomer retirement crisis? - that depends on what you mean by "crisis"

The idea of a looming retirement crisis "is overblown," says Foot, a professor of economics at the University of Toronto who studies the economic and policy implications of aging populations. “Baby Boomers are an 18-year or 19-year generation, so they will retire over two decades. It is not all going to happen at once,” he says. “We are also living longer, so there is a perception that workers might want to work longer.”

The fact that we are living longer is a major part of the problem, at least when combined with the fact that there is currently no plan to raise the retirement age (beyond the already scheduled rise to 67 by 2027). Yet the author manages to make this into a positive, suggesting that "there is a perception that workers might want to work longer".

This has got to be one of the most confused editorials that I have read recently. It its title, it states that there is "no way" that there will be a Baby Boomer retirement crisis. In its first statement, however, it says that at least it will not be a new crisis. Finally, in the above paragraph, it says that the crisis is "overblown". In any event, the following graph shows the government's projections for entitlement spending over the next 75 years:



The actual numbers and sources are at http://home.att.net/~rdavis2/pro2006.html . As can be seen, spending is projected to reach 180 percent of revenues, chiefly due to increased Medicare spending and the resultant increase in interest. This increase in interest is due to the fact that the federal debt is projected to rise from the current 65 percent of GDP to 250 percent of GDP by 2075.

Another potential problem that we face is the shift that has taken place from private pensions to 401k plans. 401k's have only been around since about 1981 and have therefore not been widely tested in practice. From studies that I've seen, it's very questionable that they will provide the same widespread retirement security that private pensions have provided to the prior generation. We will get our first real test of the 401k model with the retirement of the Boomer generation.

Of course, private pension plans are currently having their own problems. However, this would seem to create an even greater argument for strengthening the pension-characteristics of the only widespread pension plan left - Social Security.

In summary, it is true that some have used scare tactics to suggest that Social Security is about to go bankrupt, leaving all of our seniors out in the cold. As long as there are taxpayers paying into the system, there will be benefits to pay some level of benefits. Hence, there is no need to gut the program or implement any of the radical plans put forth by the right. However, both Social Security and Medicare face serious fiscal challenges far beyond what is suggested by this editorial. We don't need to panic but we do need to get to work on fixing them.

[YOY]

6. I can't wait for it!

Finally some budgets will be freed up so that the companies can hire some more young professionals into real positions instead of the constant underpaid and overworked crap jobs that lead no where.

Trust me. There are alot of us waiting in the wings to take their place, and we really need the work.

[fasttense]

8. Well, according to bush the economy is great so why are you waiting

for a good job? Go out and get it. It is there for the taking. My husband is 55, you can have his job throwing boxes at a distribution center for $10 an hour. :sarcasm:

[YOY]

9. Doesn't sound like he is one of the baby boomer managers I refered to

I make 8$ an hour doing shlepper work at an office...and I have an advanced degree and speak several languages. We're all in the muck save these upper management hogs I was refering to.

[raccoon]

11. Trouble is, a lot of baby boomers aren't going to be able to retire.

At least not until we're old enough for social security. If it's still there, that is.

[Dover]

7. Well according to the IMF World Economists...it's an economic crisis

but nothing that can't be remedied by working longer with fewer benefits.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x19164

[DaveJ]

12. "many continuing to work for years past 65"

That will be me. I will work until my mind is completey gone and maybe even after that. The goals I have in life really cannot be accomplished by age 65. I cannot imagine not working and contributing to society regardless of how old or disabled I become.

Since I'm not a Repug, my whole view of life involves working for a living.

That said I'm glad SS exists to help those who truly are unable to make money but I do not see it as a retirement plan.