Aug 16, 2010
Newsflash! America is rapidly graying, and many Baby Boomers haven’t saved enough for retirement.
Not only that, but the Baby Boom generation is literally threatening to the US economy, according to WSJ.
Basically the article is a run down of some daunting facts about the failure to save for retirement, the new era of thrift, and what the financial crisis has done to Boomers’ saving.
As of 2008, those aged 65-74 were spending 12% less than folks in the same age group did in 2000 (granted, that was a bad year).
And if the stock market and bond markets continue on their current trajectories, then the aged are really in trouble:
At the same time, the return people can hope to earn on their assets has fallen, particularly for those who switch into bonds or annuities to guarantee a fixed income. The average yield on U.S. government, corporate and mortgage bonds stands at about 2.4%, while stock-market valuations suggest a long-term return of about 6%. At those levels of return, some 59% of people aged 56 to 62 will be at risk of not having enough money to cover basic living and health-care costs in retirement, estimates Mr. Van Derhei. If market returns are higher—8.9% for stocks and 6.3% for bonds—the picture isn’t a lot better: The percentage at risk falls to about 47%.
So the other question is whether Boomers stick with their low yielding bonds (opting for a return of their money), or reach for stocks (in an attempt to get a return on their money).
Either way, as David Goldman notes, the gist is that boomers are shifting from goods to retirement instruments, and that is what the Journal is recognizing as a threat to the economy.
This article was posted: Monday, August 16, 2010 at 3:21 am