I’ve been beating the drum on the coming crisis of the Baby Boomer generation’s lack of financial readiness for retirement. Recent posts have discussed the retirement crisis in general, pension fund problems facing public sector employees, and the health of Social Security.
That’s why I’m glad that as 2010 came to a close, we saw a swell of recognition of the retirement crisis in the popular press. For example:
10,000 a day
Dave Carpenter, writing for the Associated Press (via the Boston Globe, here), reports on the sheer number of Baby Boomers reaching retirement age and the likelihood of a diminished standard of living:
Through a combination of procrastination and bad timing, many baby boomers are facing a finance disaster just as they’re hoping to retire. Starting in January, more than 10,000 boomers a day will turn 65, a pattern that will continue for the next 19 years.
…Some 51 percent of early boomer households, headed by those ages 55 to 64, face a retirement with lower living standards, according to a 2009 study by the Center for Retirement Research at Boston College.
Middle class savings woes
Helen Kearney, in a piece for Reuters (via Yahoo! Finance, link here), reports on the vastly inadequate retirement savings levels for America’s middle class:
The average American has saved less than 7 percent of his desired retirement nest egg and will likely have to keep working in retirement to supplement his income.
…”Too many Americans have their heads in the sand in the face of obvious savings deficits,” said Laurie Nordquist, director of Wells Fargo Institutional Retirement Trust. “Barring a miracle, a winning lottery ticket or a big inheritance, they’re going to be forced to dramatically cut back their lifestyles after retirement.”
Granted, the study cited in the piece was sponsored by Wells Fargo, an investment brokerage, but these figures are very consistent with other studies and analyses.
Wear & tear
John Waggoner, in a feature for USA Today (link here), examines the challenges confronting older workers who cannot afford to retire but who are physically less able to work:
However, a significant number of people won’t be able to work much past the age of 65. Some won’t be able to keep up with the physical demands of their jobs. And amid a recession, others with outdated skills or relatively high salaries are finding it increasingly difficult to get or keep desirable jobs.
“My view is that 75% of the population can work longer and would be better off doing so,” says Alicia Munnell, director of the Center for Retirement Research at Boston College. “But 25% will have health problems or skills not matched to the existing jobs, and they will have a hard time working longer.”
Empty-nesters: Save more
Gail MarksJarvis, writing for the Chicago Tribune, urges empty-nesters to save more money for retirement:
Many parents have the ability to save significantly once their children are grown and leave home, but they squander the opportunity, according to research by the Center for Retirement Research at Boston College.
Clearly, saving is difficult while raising children. . . . But, eventually, parents reach a point where they aren’t spending on schooling or piano lessons any longer, and that’s when they hurt themselves needlessly.
Public sector pension plan goes broke
Michael Cooper and Mary Williams Walsh, writing for the New York Times (link here), report on how national attention has been drawn to the town of Prichard, Alabama, as a harbinger of things to come concerning underfunded public pension plans across the country:
This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.
Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.
The Economist, recognizing the political influence of the Boomers, has weighed in with a piece examining how the retirement crisis will relate to politics and policy making (link here):
FROM the moment they entered the workforce in the 1960s, baby-boomers began to shape America’s economy and politics. They will do the same as they leave. The first of the estimated 78m Americans born between 1946 and 1964 turn 65 in 2011, the normal age for retirement. As their ranks swell in coming years, the burden of financing their retirement will mount. So will their electoral importance.
More to come
This is not a fun subject, but it is too serious to sweep under the rug. I’ll be sharing more in future articles. I predict that this will be one of the dominant U.S. news topics during 2011.
Bookmark this: Three of the excerpts above reference the Center for Retirement Research at Boston College, and with good reason. CRR’s studies on retirement planning and readiness and accompanying policy implications constitute the most important body of work on this evolving topic.
My magnum opus post on this topic: When Boomers retire (or try to): America’s coming train wreck