This hit me HARD!!
And made me so glad that I have a plan to escape my slave camp
Here is an article from The Eagle Tribune …
The Ryan Report: Listen up baby boomers. Retirement is coming… fast.
Tom Brokaw, the venerable newsman turned commentator, has recently been promoting his new project: an examination of the baby boomer generation and its impending retirement.
The series will debut on CNBC this week and is sure to be enlightening, if not downright depressing. The truth is that very few boomers are prepared, and, while ignorance may be bliss, indigence is not. There is no time like the present to do a self-administered financial reality check, so let’s begin.
Baby boomers are defined as those born between 1946 and 1964. The massive wave of humanity that is this generation has changed everything along the way, and will continue to do so in retirement. During the 1950s and ’60s, schools had to be built to accommodate this group. In the following two decades, they strained the housing markets and turned the employment picture on its ear. Now, as they begin to leave the workforce, governments throughout the world will struggle to support tens of millions of unprepared boomers.
The first task in evaluating your preparedness is adding up all of your liquid assets from all sources. Most financial experts suggest using an assumed conservative rate of return of 5 percent, no more. Social Security will be there for most boomers, but a company pension will not.
For example, if a boomer has $1 million in investments, cash and the like, cash flow of $50,000 is a reasonable expectation. Add to that Social Security of $25,000, and the post retirement cash flow would be about $75,000 annually. For many, that would be just fine, but many others would find that amount totally inadequate.
Unfortunately, the last decade did this calculation few favors. The 2000s sported a zero rate of return for most portfolios at the same time that this group was running up record levels of debt. In our example, if one has no mortgages, $75,000 might do the trick, but the typical 60 year old has one and sometimes two mortgages. Considering that the average American family has less than $100,000 saved, retirement will be slim pickings indeed. During the recent real estate meltdown, more than half of the foreclosures were on baby boomers, so home equity can no longer be considered the safety net.
Expectations are also rampantly unrealistic. Eight out of 10 boomers report that they expect to work “some” after retirement, but only one third expect to cut back their lifestyle.
Amazingly, as they approach their “golden years,” boomers continue to shun the stock market, instead putting most of their 401(k) contributions into money market accounts yielding less than 1 percent. During the last 12 months, stocks, as measured by the Standard and Poor’s 500 Index, have grown by about 30 percent. Where’s the logic?
There is little doubt that fear is the governing principal that causes boomers to allocate their retirement assets into “safe” places. However, investors need to know that retirement isn’t the end of the line, but rather the beginning of a very new and different chapter in their lives.
This money that they are currently investing will be spent over life expectancies of 20 years or more, which begs the question, “Do you think the stock market will be higher or lower in 20 years?” Most people would guess “higher,” as history would confirm, yet they still react to short-term fears. It has been said that there are only two ways to make money — a person at work or money at work. When you no longer have that person at work, the money has to do all of the heavy lifting. Sadly, most boomers haven’t figured that out.
During the last five years, America has engaged in heated debates as to the sufficiency of Social Security and, more recently, the form and substance of health care. Both of these hot topics have thus far resulted in more heat than light, as both political parties stood their ground and refused to budge.
Baby boomers will be deeply affected by both subjects. Social Security, especially for younger boomers, will most certainly be reduced, while health care for seniors is becoming unaffordable. Add to that the paucity of savings of the average 60 year old, and you have a witch’s brew of trouble that you just know will be served shortly.
What can you do? Take the above mentioned reality check on the back of a napkin. If you don’t like the answer, call a financial professional. It is a well known fact that people who work with an advisor have much better returns than the do-it-yourself crowd. Remember, there are no do-overs.
William T. Ryan is president of Ryan Financial Advisors in Andover. The owner-managed firm provides highly individualized wealth-management services and financial advice to families, individuals, corporations, trusts and pension plans. His column appears each week in the Sunday Eagle-Tribune. Reach him at 978-475-1500 or by e-mail at wtryan@ryanfinancial.com.