Show Me the Money

Why can’t baby boomers put away more money for their retirement? We know we’re going to need more than social security to live on, so what’s the problem? Besides losing a pantload of money when the market tanked, a slow recovery, and maybe losing your job, I mean what’s your excuse?

The conventional wisdom (sidebar: when did wisdom get conventional?) has it that boomers have selfishly squandered their money on or fancy cars, but that may be just one more myth among the many when it comes to baby boomers.

The National Center for Policy Analysis recently reported on how spending habits have changed over the decades. So guess in what areas boomers are spending more than prior generations. Let’s start with education: costs have increased 80% for 45 to 54 year-olds and 22% for 55 to 64 year-olds. Then there’s the continuing costs of supporting adult children. Remember when you got out of high school or college and then got a job? It has not worked out that way for a lot of the boomer offspring. About half of all boomers are still providing some financial support to their kids. Next up: housing costs have risen 25% from 20 years ago. And don’t forget healthcare costs: medical care and premiums have skyrocketed in 2 decades.

If all these factors are not enough to convince you that boomers have not been playing the profligates, consider how stagnant our earnings have been. Real median income in 1990 for 55 to 64 year-olds was $52,340. It peaked in 2007 at $60,345 and had fallen to $56,575 by 2010. I don’t want to know what it is in 2012, because it cannot have gotten any better.

So let’s review: everything is costing more but you’re making less. So how do we try to close that gap? We spend less on clothing, less on dining out, and less on transportation (there’s some very old cars out there). The experts advise us to focus on the spending categories that we can control but that seems difficult when it appears the cost of living is out of our control.

But let’s end on an upbeat note. Eventually your kids are going to have jobs and homes, and when they do, you can stake a claim on one of the bedrooms and live off their largesse for a while. No kids? It’s not too late to adopt.

Jay Harrison is a graphic designer and writer whose work can be seen at DesignConcept and at BoomSpeak. He's written a mystery novel, which therefore makes him a pre-published author.

Hi Ho, Hi Ho

It’s off to work we go.

And the rest of the song lyrics?

We dig, dig, dig, dig, dig dig, dig, dig In our mine the whole day through To dig, dig, dig, dig, dig dig, dig, dig It’s what we like to do It ain’t no trick To get rich quick If you dig, dig, dig With a shovel or a stick dwarf miners

And boomers continue to dig – well past age 65. In fact, the percentage of baby boomers working past the traditional retirement age of 65 is now at a record high, and we all know why. They can’t afford to retire.

It’s not some dream retirement scheme that’s keeping them in the labor market. It’s way more complicated than that. Boomers are still working to compensate for the hit they took when the market tanked. They are still working because they are supporting offspring who have returned to the nest. They are still working because they realized they don’t have enough savings to cover life spans that are projected to last longer than ever. And many boomers are still working simply because the alternative lay-about lifestyle is an anathema to them.

If you thought you were going to die in your eighties, you might as well pack it in at age 65 and have Grumpy15 years to travel/golf/fish/knit/whatever. But if most of us are going to live well into our nineties, that’s 25 years to fill, or a hell of a lot of bogeys/fish/scarves. And even that assumes we will have the mobility for any of these activities when we’re in our nineties.

For many boomers, working is a habit that’s hard to break. Unlike our parents, perhaps, boomers are often defined by their careers. It can be a comfort to say “I AM a lawyer/doctor/designer/ manager/teacher/musician, than to say I WAS any of those things. Even if retirement brings new challenges and joys, the career that was your life’s work is completely in the rear view mirror, and that can be an unsettling sensation.

Speaking of unsettling, the statistic in the latest Labor Department stats that gave me pause was that for the first time ever, one in nine men over the age of 75 were still working, along with one in 20 women.

And here I was thinking that 70 might be the next high water mark for retirement.

Jay Harrison is a graphic designer and writer whose work can be seen at DesignConcept and at BoomSpeak. He's written a mystery novel, which therefore makes him a pre-published author.

CAR-BOOM!!

Forget new car ads aimed at twenty-somethings – that’s not who’s buying cars. Insert sound of CAR-BOOM!! here.

A new study by J.D. Power (who is that guy, anyway...and who are the associates?) and AARP showed that people over 50 are now buying 6 out every 10 new vehicles sold in the U.S. And if you look only at the big three carmakers in the U.S., 67% of new models are bought by boomers.

So what’s the deal? Retirees who want some new rides is one big factor. Maybe they have been scrimping for a bunch of years driving ten year-old used cars, but they want that new car smell again.

It could also be that boomers are the only people who can afford new cars. Have you looked at the prices lately? It sounds awfully cliché, but who doesn’t remember (circa 1969) when you could buy a brand new car with all the options for around $3,200? Try multiplying that figure by a factor of 10 to arrive at the average cost in 2012. Another factor is that younger workers have been harder hit by the recession than boomers, so they are the ones foregoing new cars and hanging on to their used vehicles for longer periods.

And maybe, just maybe, boomers are acting out what that tiresome bumper sticker says – “We’re Spending Our Children’s Inheritance.” Maybe some boomers are tired of paying for elder care, tired of subsidizing unemployed/underemployed offspring, and just plain tired. And as everyone knows, the cure for this particular malaise is to go shopping. For a new $30,000 car. It may also explain the increasing popularity of leasing. That way you can get a new car every two or three years by making exorbitant monthly payments. Is it really cost-effective? No, but who cares. Life is short and the least you can do for yourself is have a nice ride – or two. Don’t forget all those retirees that have also bought old trucks and muscle cars to play with on the weekend.

If you’ve been on the fence about buying a new car, this should give you the confidence to just do it. You’ll be helping the economy. Your kids really don’t want that big inheritance anyway. They know it will just spoil them for the way the world really works.

Jay Harrison is a graphic designer and writer whose work can be seen at DesignConcept and at BoomSpeak. He's written a mystery novel, which therefore makes him a pre-published author.

Boomers Suffering from Withdrawal?

Not likely you say? Since when are baby boomers getting shy? Not talking about that kind of withdrawal. We’re talking about the kind of withdrawal you make at the bank, and specifically, what happens to the U.S. economy when a lot of baby boomers start withdrawing their savings and portfolios all at once.

Is this scenario just one more event that the 24 hour news machine would have you freak out about? Or is it real?

Let’s look at the numbers. There are 78 million or so boomers -- but they are not all retiring at once. However, according to the Investment Company Institute, 44 percent of all mutual-fund shareholders are baby boomers. So let’s say that over the next couple of decades, they all start drawing down on these funds. Are there enough younger investors behind them to pick up the slack? Doubtful.

The theory is that the economy drives the market, but you can’t discount demographics. Ten thousand people retiring every day for 20 years (and drawing down on their savings) is going to have a dramatic effect on the markets. Twenty years from now, almost 20 percent of Americans will be age 65 or over, and that’s a lot of people slurping away at their savings. Experts point to Japan’s stagnant economy for a lesson in what happens when more than a quarter of your population is over 65.

Yet another sign of trouble in paradise is the increasing number of boomers who are shifting to bonds and dividend income stocks as they near retirement. Investing for the long-run is no longer a viable option for boomers on the cusp of their twilight years.

So, is the sky falling or not? Boomers did have a bunch of kids and those kids are now investors themselves. That helps, but experts suggest three specific courses of action: 1) Avoid Japan and Europe and look to invest in countries with younger populations. 2) Match stock picks to national demographic trends (e.g. agriculture in India). 3) Stick with income-producing equites and corporate bonds.

Finally, my personal advice: stop watching the 24-hour news cycle and try to enjoy your final years on earth.

Jay Harrison is a graphic designer and writer whose work can be seen at DesignConcept and at BoomSpeak. He's written a mystery novel, which therefore makes him a pre-published author.

Gallows Humor for Gallows Economy

You know how to tell when the gravity of this recession has really sunk in? When the gallows humor brand of jokes start making the rounds.

It started a few months back when my accountant told me that his wife was going to work until age 84 while his plan was to die at his desk. We’re all concerned about our future, financial and otherwise, but when everything looks darkest is the best time to laugh our way through this mess.

Baby boomers have lost as much as anyone else, only they have lost monies and home value that they were counting on for retirement. At least the jokes come cheap. There’s the one about how your 401k has been converted into a 201k. Or how we now have boomerang parents that are moving back in with their kids.

Financial advisors probably have the largest cache of jokes as they try to make sense out of this mess and maintain some perspective. Some of the best jokes are actually revised definitions. To wit:

CEO -- Chief Embezzlement Officer.

CFO -- Corporate Fraud Officer.

BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET -- A 6- to 18-month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.

VALUE INVESTING -- The art of buying low and selling lower.

P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.

BROKER -- What my broker has made me.

STANDARD & POOR -- Your life in a nutshell.

STOCK ANALYST - The idiot who just downgraded your stock.

FINANCIAL PLANNER -- A guy whose phone has been disconnected.

MARKET CORRECTION -- The day after you buy stocks.

CASH FLOW -- The movement your money makes as it disappears down the toilet.

And finally, here’s some food for thought. If you had purchased $1000 of AIG stock one year ago, you would have $33 today. If you had purchased $1000 of Lehman Brothers stock one year ago, you will have $0 today. However, if you had purchased $1000 worth of beer one year ago, drunk all of it, and turned in the aluminum cans for recycling, you would have received $214. Therefore, the best investment plan is to drink heavily and recycle. It’s called the 401keg Plan.

Jay Harrison is a graphic designer and writer whose work can be seen at DesignConcept and at BoomSpeak. He's written a mystery novel, which therefore makes him a pre-published author.