The Independent Investor: Why Baby Boomers Are Grumpy
By: Bill Schmick On: 01:30PM / Friday January 28, 2011
You would think those born between 1946 and 1965 would have a lot to be thankful for. After all, the first wave of those baby boomers is finally eligible to retire in 2011. The recession appears to be over and jobs are beginning to make a comeback, even the stock market is performing well — so what's the problem?
The Pew Research Center's recent survey on baby boomers indicates that fully 80 percent are "dissatisfied with the way things are going in the country today."
Quite a bit of that unhappiness can be traced to personal finances and negative economic views. That makes sense since boomers were hit harder than most segments of the population by the double whammy of declining stock prices and housing prices. For those laid off who are older than 50 years of age, it has been harder to obtain a new job. And even those who are employed argue that real income has stagnated over the last decade. As a result, the majority say their household finances have worsened and a higher portion of boomers than other ages have had to cut spending this year.
The current estimate of baby boomers in America is 79 million, about 26 percent of the total U.S. population. Although they still consider retirement age at 65, the typical boomer believes that old age doesn't begin until age 72, according to the survey.
Times have changed since the boomers came of age in the '60s and '70s. Back then, America was the land of honey and horizons seemed to stretch forever. Now, most boomers point to the huge national debt, the deficit, a lack of political leadership and lament that America is past its prime. They and their country are in decline, or so the story goes.
"My parents worked hard, saved, retired and enjoyed their golden years," said one disgruntled boomer, (who gave me the idea for this column).
"Why can't I do the same?"
Actually, there are a number of reasons why this time around it is different and most of the fault lies with us Boomers. Back in the day, our parents were part of a pension plan that included monthly retirement savings on the company's tab. My Dad was a machinist at SKF (a ball-bearing manufacturer) for 30 years and worked another full-time job at night. The pension contributions increased as his salary rose and as the number of years worked at the company increased. His pension was conservatively managed by trained professionals. It was also fairly easy to calculate the money he would be receiving on the first day of retirement and my parents planned for that.
Their mortgage was fixed and ended right around the time of retirement. Your parents also knew how and what their medical plan would be in retirement as well as Social Security benefits. Most costs were controlled, or at least somewhat contained while families lived frugally and spurned debt. Some did so successfully and enjoyed those golden years, others (like my Dad who died of a massive heart attack a few years after retiring) didn't do so well, but at least the results were fairly predictable.
We baby boomers wanted more.
We did away with pensions and took control of our own retirement in the form of deferred-retirement plans like 401(k)s and IRAs. The problem was that contributing to those plans was voluntary (unlike pension plans). And somehow there was always something more important to spend our money on. Besides it was much more fun to "flip houses and make a killing" than make those monthly contributions toward retirement.
Even those who did save only kinda sorta did it. Self-directed, deferred-retirement plans should have done exceptionally well in the period from 1982 to 2000. It was the greatest bull market in recorded history, but few actually put enough money in these plans to make a difference. By 2001, when some of us actually began saving more, we watched those savings first disappear during the Dot-Com bust and then again more recently in 2008-2009. As a result, retirement plans actually went nowhere in the last decade.
As if that wasn't a low enough blow, those of us who counted on our houses to bail us out — the "I can always sell my house" crowd — witnessed that store of wealth decline 30 percent in the last two years. Houses are not moving, or if they are, sellers are forced to take a cut depending upon the size and location of your home. For someone forced to sell, faced with the prospect of living on social security with insufficient retirement savings, there is definitely something askew with the American Dream. It is no wonder that Boomers are grumbling. Many feel their country’s economic prowess has peaked and the promise of prosperity for all has been broken. Living the dream for many has turned into living a nightmare.
Maybe it was that old long-haired hippie in us that whispered we would live forever so why worry about retirement, or if we really had to, we could get by living in our old VW bus. It is only now that those romanticized notions are disappearing in the face of reality. But it is not too late. Maybe you can't retire at 65 but that may turn out to be a good thing. You can always start saving, and if I am right about the stock market this year, even first-time investors could make a substantial return on their money.
This country still holds promise for those willing to grasp it. No one is ever too old for that.
Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or e-mail him at firstname.lastname@example.org. Visit www.afewdollarsmore.com for more of Bill's insights.
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I think you've hit part of the problem, but I also think you're missing a part. Government regulation that was in place to prevent the Gordon Gecko's of the world tip all the scales in their favor was almost totally wiped out. I think alot of people feel like their government, and those they trusted to manage their money, sold them out to line their own pockets, garner votes, and manipulate world power.
Who lives at the bottom rung social trust now - trial lawyers, politicians, or Wall Street trolls?
Yes...we did it to ourselves...and you missed a key piece to this picture: one of our generational characteristics (and one we passed down the family tree trunk) is deferral of responsibility...thus our justification for the crankiness...none of what happened is our fault...
No, make that two key pieces missing from this analysis of Boomer bumming...that we started out kinda cranky. Those protests & sit-ins weren't because we were happy campers.
I've had folks contact my show, complaining: "now we'll have to work longer than we expected because our investments lost so much value..." My response: be glad, not mad...we're young enough to continue working to make up for lost income. Our parents, who also lost so much, are not...they're the true tragedy here.
30 years of supply side economics will screw the working class every time.
Maybe boomers didn't save because saving their stagnating incomes (look at the data from 1973 forward) were barely enough to maintain what they thought was "par" for standard of living.
Don't fool yourselves. Yes we brought this on ourselves by electing slick investor-class charlatans who undermined two generations of Glass-Steagal safety and insisted on creating a system that benefited only those who already had skin in the game.
Why do economists only look at household income when most households have at least two adults working, compared to one 40 years ago? Should income have risen dramatically?
Why did all the benefits from the efficiencies that workers created, (the highest GDP per hour worked of any nation - ever!) go only to those who already owned the stocks?
Why do companies hide behind phrases like "shareholder value" which generally never look past the next few quarters? (Could it be that the executives have incentives of their own to maximize stock price?)
We live in a modern Plutocratic/Kleptocratic society. We haven't fallen so far as to rob starving widows... yet, but just watch what the current crop of policy makers are proposing, with their dismantling of the social safety net, and you will see it is not far behind.
"A" has it right. The Smith Barney's and Merrill Lynch's of the world have collected fortunes of fees from clients over the last few years even though the markets (and people's portfolios) are down.
That doesn't make them evil, but it makes you second guess if you are in the right financial relationships.
It's tough. How do you trust the person that lost half of your money? Sure, the markets have come back somewhat (and so has my portfolio), but shouldn't they have protected us in the first place? I mean, that's what they get paid for.
Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.