The post-war generation will begin turning 65 in January at the rate of 10,000 per day. Those are big numbers, and the number crunchers are having a hay day predicting societal, entitlement and financial disasters of epic proportions tied to aging boomers. As a former journalist I’m somewhat skeptical of news stories based purely on statistical projections. It’s too tempting to sensationalize numbers. Take this dismal Associate Press New Year’s story, for example. It’s written with all the urgency of impending catastrophe; yet if you read closely you’ll realize it could have been written any time in the last three years or even a year from now:
Baby boomers near 65 face personal finance crisis
Through a combination of procrastination and bad timing, many baby boomers are facing a personal finance disaster just as they’re hoping to retire.
The boomers, who in their youth revolutionized everything from music to race relations, are set to redefine retirement. But a generation that made its mark in the tumultuous 1960s now faces a crisis as it hits its own mid-60s.
“The situation is extremely serious because baby boomers have not saved very effectively for retirement and are still retiring too early,” says Olivia Mitchell, director of the Boettner Center for Pensions and Retirement Research at the University of Pennsylvania.
There are several reasons to be concerned:
- The traditional pension plan is disappearing. In 1980, some 39 percent of private-sector workers had a pension that guaranteed a steady payout during retirement. Today that number stands closer to 15 percent, according to the Employee Benefit Research Institute in Washington, D.C.
- Reliance on stocks in retirement plans is greater than ever; 42 percent of those workers now have 401(k)s. But the past decade has been a lost one for stocks, with the Standard & Poor’s 500 index posting total returns of just 4 percent since the beginning of 2000.
- Many retirees banked on their homes as their retirement fund. But the crash in housing prices has slashed almost a third of a typical home’s value. Now 22 percent of homeowners, or nearly 11 million people, owe more on their mortgage than their home is worth. Many are boomers.
Are some baby boomers ill-prepared for retirement? No doubt. Is that reason to predict financial catastrophe for an entire generation? I doubt.