Home > Politics, Trends > Financial Collapse Wiped Out Boomers Assets Foreshadows Crisis in Healthcare and Retirement

Financial Collapse Wiped Out Boomers Assets Foreshadows Crisis in Healthcare and Retirement

April 15, 2011

Household net worth fell from 2007 to 2009 by a total of $17.5 trillion or 25.5%. This was the equivalent loss of one year of GDP. By the fourth quarter of 2010, the household net worth had recovered by a growth of 1.3 percent to a total of $56.8 trillion. An additional growth of 15.7 percent is needed just to bring the value to where it was before the recession hit in December 2007

– Wikipedia, Wealth in the United States

We are all mortal. If you live long enough, you age. There will come a time when you can no longer work and earn money. That is when you will need every bit of your savings, Social Security, and public health programs because on top of getting old, you will get sick, your eyesight will get worse, you will not be able to drive, and that is just for starters. The biggest problem ON TOP OF THOSE PROBLEMS IS MANY MILLIONS WILL OUTLIVE THEIR ASSETS.

The 2008 financial collapse wiped out a large chunk of Baby Boomer assets. Trillions in savings, 401ks, mutual funds, pension, and real estate were lost . Many Boomers do not have enough years left in their life to earn back what they lost. They will be even more dependent on government programs and need to fight for preservation of Medicare, Medicaid, and Social Security. That fight began today as the House Republicans without a single Democrat vote, ramrodded the Ryan $5.8 trillion budget through which essentially kills Medicare.

An April 12, 2011 Investors Insight article provides a report and overview of where we are today. Here are some excerpts: Click here for entire article.

The so-called Baby Boomer generation reflects those Americans born after World War II from 1946 to 1964. We are the largest generation ever born in America. This year, the first of the Baby Boomers are on schedule to hit the traditional retirement age of 65. Next year, they will reach the Social Security retirement age of 66, and the number of Boomer retirees will grow rapidly each year after that.

Observers of the Baby Boomers have long predicted that their retirement would put unprecedented strains on our entitlement systems – Social Security, Medicare and Medicaid – and that is undoubtedly correct. And with the government on track to run trillion-dollar deficits as far as the eye can see, it looks like we are on a collision course in the years just ahead.

Most Boomers never saved enough to begin with. And the two stock bear markets since 2000 have devastated much of what little they have saved, including their 401(k)s, IRAs, pension plans, etc. That’s why many Boomers are in real retirement trouble! There is no way many Boomers can retire into the lifestyle they thought they would. Some even feel they’ll never be able to retire at all.

A new study released last week from the Associated Press highlights just how bad the problem is for retiring Boomers. In the pages that follow, I will highlight the findings of this study – with the hope that I don’t depress you too much. Then I will follow-up with two alternatives for your 401(k) plan investments that may make sense for many of you who want some fresh investment options for your retirement nest egg.

Associated Press Survey of Baby Boomers

My generation, the so-called Baby Boomers, largely bought into Wall Street’s age-old mantra that buy-and-hold is the only long-term strategy for success in the stock and bond markets. I’ll admit that the historical data behind this theory is correct IF you go back a hundred years.

But going back 100 years is hardly a blueprint for what we have seen since 2000. We have experienced two devastating bear markets in stocks, including the triple-whammy of a credit crisis and the Great Recession.

An Associated Press survey of Baby Boomers released last week had some somber findings, not that they will surprise my readers. The bottom line: Baby Boomers facing retirement are worried about their finances, and many believe they’ll need to work longer than planned or will never be able to retire, the latest survey finds. What else is new? Here are a few quotes from the latest AP Boomer survey:

The 77 million-strong generation born between 1946 and 1964 has clung tenaciously to its youth. Now, boomers are getting nervous about retirement. Only 11 percent say they are strongly convinced they will be able to live in comfort… Another 44 percent express little or no faith they’ll have enough money when their careers end.

Further underscoring the financial squeeze, 1 in 4 boomers still working say they’ll never retire. That’s about the same number as those who say they have no retirement savings.

The Associated Press-LifeGoesStrong.com poll comes as politicians face growing pressure to curb record federal deficits, and budget hawks of both parties have expressed a willingness to scale back Social Security, the government’s biggest program.

The survey suggests how politically risky that would be: 64 percent of boomers see Social Security as the keystone of their retirement earnings, far outpacing pensions, investments and other income.

The survey also highlights the particular retirement challenge facing boomers, who are contemplating exiting the work force just as the worst economy in seven decades left them coping with high jobless rates, tattered home values and painfully low interest rates that stunt the growth of savings.

Here are a few more quotes from the AP survey that probably won’t surprise many of my readers:

Two-thirds of those still on the job say they will keep working after they retire, a plan shared about evenly across sex, marital status and education lines, the survey finds. That contrasts with the latest Social Security Administration data on what older people are actually doing: Among those age 65-74, less than half earned income from a job in 2008.

Excluding their homes, 24 percent of boomers say they have no retirement savings. Those with nothing include about 4 in 10 who are non-white, are unmarried or didn’t finish college.

At the other end, about 1 in 10 say they have banked at least $500,000. Those who have saved at least something typically have squirreled away $100,000, with about half putting away more than that and half less.

In regard to these last numbers, a few years back Mike Posey, my Senior VP, wrote a Retirement Focus article entitled “How Much is Enough?” When I showed Mike the article about the AP Survey, he wasn’t surprised, but he did note that there is a new phenomenon going on among Boomers at or near retirement.

It seems that many investors who previously thought they had saved enough money for a comfortable retirement are now becoming concerned that they might outlive their money. We’re not talking about those who have put away a couple of hundred thousand or so, but those with a million dollars or more who are now uncertain about their retirement future.

*end excerpt.

Now this last part is of particular importance. My mom worked, saved, and was thrifty, BUT she outlived her assets — her savings. She is 85 years old. Her money ran out when she was 82. Social Security was simply not enough to keep pace with the cost of living, the cost of her supplemental health coverage, and her prescription drugs. My business was wiped out in 2007-2008. There are 70 million Baby Boomers aging and moving into the retirement years of their life. It is imperative that we preserve Medicare, Medicaid, and Social Security. It will be a tough fight against Libertarians who are corporatists who are strongly against paying taxes and want to privatize the three major programs. Republicans have joined with the Libertarians as they receive financial support from the large corporations and health care industry.

I urge my readers to get involved and contact their representatives to fight to preserve Medicare, Medicaid, and Social Security. This is the fight of our life.

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