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baby boomers article
Old 03-04-2006, 07:34 AM   #1
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baby boomers article

http://money.cnn.com/2006/03/01/reti...mmit/index.htm

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According to research from Fidelity Investments, Baby Boomers only have enough in savings and other income sources to replace 59 percent of their pre-retirement income. Of those with 401(k) accounts, the average account balance is just $80,000, and many typically save just $2,750 a year toward retirement.
I don't get it...if the average account balance is a measely $80K, how can boomers have enough to replace 59% of their pre-retirement income?...I don't think anyone really has any idea what kind of shape boomers are in financially...so many conflicting articles...59% of pre-retirement income doesn't sound so bad to me...80K as an average balance is downright scary.
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Re: baby boomers article
Old 03-04-2006, 07:54 AM   #2
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Re: baby boomers article

Lack of financial sense makes no sense to people who have it.

The hospital where my wife works...maybe 2-3 of the doctors and nurses she works with are contributing to their retirement savings at all. When she pushes them on it, they say they'll probably just keep working, or they're presuming the pittance pension and social security "will be enough".

Nobody in her family has a dime put aside for retirement.

I think the 'average' if you took out the BS and looked at it, consists of a lot of people with a decent retirement plan and a lot of people with nothing or nearly nothing at all.
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Re: baby boomers article
Old 03-04-2006, 08:33 AM   #3
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Re: baby boomers article

From today's newspaper where Bruce Williams is a columnist. A sign of things to come for the unprepared....

Q from writer (and paraphrasing) - "I am 64 & have done little to prepare for retirement....My only asset is a $32,000 IRA...I moved to Vegas last year where I work and make $25,000 a year...I plan to work until the age of 70 and save via company's 401K and IRA contributions....With my IRA, additional savings and SS, will I be able to achieve a little independence?"

A from Bruce (and paraphrasing) - "I don't see an opulent retirement in 6 years for you....Even then (saving the SS he taps), life is going to be a little difficult and you might find yourself having to work part-time, even beyond 70."

We talk about what motivates us to save, prepare and hopefully FIRE. Well, for me, stories like this are one of them.
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Re: baby boomers article
Old 03-04-2006, 02:45 PM   #4
 
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Re: baby boomers article

Once again, this demonstrates that all baby boomers won't run for the door at age 62, as the Social Security statistics suggests.

They will probably continue to work because they have to. They Will also put off taking social security when they see how much of it will be taxed by earning money at their jobs. And probably will die early, by the additional stress that working will cause.

Actually, I think S.S. is probably one of the only Government programs that is in fine shape. Everyone here does understand now that Dubya was not after Social Security, because it was a financial threat to the U.S. Treasury?
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Re: baby boomers article
Old 03-04-2006, 08:22 PM   #5
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Re: baby boomers article

Quote:
Originally Posted by Cut-Throat
Once again, this demonstrates that all baby boomers won't run for the door at age 62, as the Social Security statistics suggests.

They will probably continue to work because they have to. They Will also put off taking social security when they see how much of it will be taxed by earning money at their jobs. And probably will die early, by the additional stress that working will cause.
Even better, at age 65 their employers can cancel their health insurance and let Medicare take up the slack!

Ruh-roh...
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Re: baby boomers article
Old 03-05-2006, 06:42 AM   #6
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Re: baby boomers article

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Originally Posted by OldMcDonald
I don't get it...if the average account balance is a measely $80K, how can boomers have enough to replace 59% of their pre-retirement income?...
I was suprised to see "59% replacement" number too - I don't see how the average baby boomer has resources for that - I'd like to see the assumptions and calculations.

If it is true, then the boomers are in much better shape than I've read elsewhere.
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Re: baby boomers article
Old 03-05-2006, 07:54 AM   #7
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Re: baby boomers article

So many people I know--especially boomers--have elusive income, it's hard to know what 59% of their income is, what with bouts of un- and underemployment,*intermittent contract employment, new jobs paying less than previous jobs, etc. Plus so many jobs these days come without the perks of traditional jobs--for many of us there is no pension or even 401k match (or even 401k at all at early-phase startups) and there's not so much emplyer contribution toward health insurance. When I say that my husband and I are living on 25% of our peak income, that peak income existed for just a brief time and wasn't even our last income before I retired and DH semi-retired. Our current income is more like 50% of our low-point regular income. And in full retirement we expect to have that same 25%...or is it 50%? Well, whatever it is, we live quite nicely on it.
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Re: baby boomers article
Old 03-05-2006, 09:12 AM   #8
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Re: baby boomers article

Quote:
Originally Posted by BabyApe
The 401k comment is a meaningless statistic since people switch jobs so frequently and usually roll their 401k into an IRA. It sounds like a fidelity survey used as a press release to get attention in the media.
Surprisingly, two thirds of people in their 30's and early 40's cash out their 401k's when they leave, and almost 80% of people in their 20's cash it out, taking the penalty and tax hit. The majority of people under 50 that dont cash it out leave it where it is. Simple ignorance of their options is the likely culprit.
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Re: baby boomers article
Old 03-05-2006, 09:24 AM   #9
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Re: baby boomers article

And if the 30 and 40 yr olds don't cash out they're constantly borrowing from it. I have people at work that think of it as a savings account. Half leave and never pay it back taking the hit on the penalty and taxes.
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Re: baby boomers article
Old 03-05-2006, 09:28 AM   #10
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Re: baby boomers article

Here is information John Mauldin mentioned this week in his newsletter from a survey of 1000 people on saving for retirement: http://tinyurl.com/ks6e4


• Nearly a third of Americans saved nothing for retirement last year.
• One out of four Americans in their peak earning years, and nearing retirement (age 50-65), saved nothing for retirement in the last year.

“The results of this survey show us that for a comfortable retirement, Americans are going to need to become far more serious about their retirement savings,” said Forum CEO Don Evans.

The poll also indicates that those that are saving are putting away far too little:
• Nearly three out of five younger Americans (35-49) saved less than $10,000 for retirement last year – too little to sustain an average middle-class lifestyle in retirement.

Our survey also found that younger workers plan to rely far less on Social Security and far more on personal savings through tax-advantaged savings vehicles such as 401Ks and IRAs:
• More than half of Americans under 50 think Social Security will provide only a minor source of income, compared to 60 percent of Americans age 65 or older who rate Social Security a major source of retirement income.
• 65 percent of the youngest Americans (18-34), see 401Ks and IRA as providing a major source of income in retirement.



Poll conducted by RT Strategies February 23-26, 2006. N = 1,000 adults nationwide, Margin of Error: + 3.1%
###


Our office has good 401k participation, partly because we automatically sign people up and we are generous with employer contributions to the profit sharing portion of our 401k. However, my experience has been consistent with what CFB mentions, the younger people when leaving the job tend to cash in their 401k. I would talk to them and try to discourage them from doing so. But they always "needed the money."
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Re: baby boomers article
Old 03-05-2006, 09:48 AM   #11
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Re: baby boomers article

Quote:
Originally Posted by Martha
Here is information John Mauldin mentioned this week in his newsletter from a survey of 1000 people on saving for retirement: http://tinyurl.com/ks6e4

• Nearly a third of Americans saved nothing for retirement last year.
• One out of four Americans in their peak earning years, and nearing retirement (age 50-65), saved nothing for retirement in the last year.
Ben Stein was on CBS Sunday Morning talking about the Boomers and retirement. He said the vast majority of Boomers were in "deep doo-doo" when it came to retirement savings. Once their meager savings is spent, they will be living on social security and face "a cut in lifestyle more dramatic than at any time since the Great Depression."

This fate is inevitable for most older Boomers, and younger Boomers will meet the same fate if they don't take drastic measures "today" to cut spending, get out of debt, and save.

He didn't mention the future of SS but did describe Medicare as a "train wreck". :P

He also didn't mention that many of them won't ever retire...

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Re: baby boomers article
Old 03-05-2006, 09:55 AM   #12
 
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Re: baby boomers article

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Originally Posted by REWahoo!
Ben Stein was on CBS Sunday Morning talking about the Boomers and retirement. He said the vast majority of Boomers were in "deep doo-doo" when it came to retirement savings. Once their meager savings is spent, they will be living on social security and face "a cut in lifestyle more dramatic than at any time since the Great Depression."

This fate is inevitable for most older Boomers, and younger Boomers will meet the same fate if they don't take drastic measures "today" to cut spending, get out of debt, and save.

He didn't mention the future of SS but did describe Medicare as a "train wreck". :P

He also didn't mention that many of them won't ever retire...
I also saw the Ben Stein spiel.

He described the bleak retirement of many boomers, but somehow did not draw the conclusion that they won't stop working!

I think if someone really believes that boomers will retiring in mass, they would also come to the conclusion that there will be a severe labor shortage also. This will prompt companies to keep older workers on the job, etc. etc.

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Re: baby boomers article
Old 03-05-2006, 10:25 AM   #13
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Re: baby boomers article

I went looking for articles on "Total Savings" and "Boomers" this one came up.

http://www.bls.gov/opub/cwc/cm20050114ar01p1.htm

This article seems to take into effect ‘all savings’ In it there are two tables

Table 3 http://www.bls.gov/opub/cwc/tables/cm20050114ar01t3.htm
Which shows the average/mean savings is $49,000, however the median is $2,000. For those non statisticians out there, that while the average (take all savings and divide it by the number of savers i.e. Warren and Bill) is $49,000, the median $2,000 (50% of the people are above this 50% below). This indicates that there are a lot of folks out there that are not FI or are even close to it. The Standard Deviation is $174,000. In a normal curve 98% of all values can be found within 2 standard deviations from the mean (Z factor). This would mean that most 98% would have from $0 to $348,000. I am not sure what the z factor would be for a skewed distribution, which this obviously is. (I know just about enough statistics to be dangerous!)

Table 5 http://www.bls.gov/opub/cwc/tables/cm20050114ar01t5.htm
This table would indicate that older boomers have less than $90,000 in the bank.

What does all this tell me? There are not many folks like us out there, that in the future there is a better chance of a 72 year old than a 16 year old handing me my order at Mickey Ds, and if history holds true, the biggest voting block is the elderly, we are in for a very interesting political upheaval.
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Re: baby boomers article
Old 03-05-2006, 11:25 AM   #14
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Re: baby boomers article

Interesting stats.* I wonder where they get them from?* I know that I/DW have retirement investments among 5 major firms.* Do they look at our SS#, vs. our common address, divide by 2, and come up with a "fact"?

Believe me, I'm not complaining* :; I just want to understand their "data mining" for these "facts"*

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Re: baby boomers article
Old 03-05-2006, 11:46 AM   #15
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Re: baby boomers article

They ask people. IIRC, this was all done by selective survey.
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Re: baby boomers article
Old 03-05-2006, 11:53 AM   #16
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Re: baby boomers article

Quote:
Originally Posted by Rustic23
I went looking for articles on "Total Savings" and "Boomers" this one came up.

http://www.bls.gov/opub/cwc/cm20050114ar01p1.htm

This article seems to take into effect ‘all savings’ In it there are two tables

Table 3* http://www.bls.gov/opub/cwc/tables/cm20050114ar01t3.htm
Which shows* the average/mean savings is $49,000, however the median is $2,000. For those non statisticians out there, that while the average (take all savings and divide it by the number of savers i.e. Warren and Bill) is $49,000, the median $2,000 (50% of the people are above this 50% below). This indicates that there are a lot of folks out there that are not FI or are even close to it. The Standard Deviation is $174,000. In a normal curve 98% of all values can be found within 2 standard deviations from the mean (Z factor). This would mean that most 98% would have from $0 to $348,000.* I am not sure what the z factor would be for a skewed distribution, which this obviously is. (I know just about enough statistics to be dangerous!)

Table 5* http://www.bls.gov/opub/cwc/tables/cm20050114ar01t5.htm
This table would indicate that older boomers have less than $90,000 in the bank.

What does all this tell me? There are not many folks like us out there, that in the future there is a better chance of a 72 year old than a 16 year old handing me my order at Mickey Ds, and if history holds true, the biggest voting block is the elderly, we are in for a very interesting political upheaval.
If those numbers are true, they are truly mind-boggling...but then I have a hard to reconciling them with my original post that the average person has saved enough to replace 59% of their income...guess stats can be slanted any way you want...

You'd be hard pressed to know that people are not wealthy...drive thru neighborhoods and look at all the meticulous mcmansions, 2 new cars in the driveway, the sales of 2nd homes, the cost of renting a beach-front house at any popular destination etc...sometimes I just don't understand how so many people can have so much money at their disposal, and then you read that the median savings is $2000 for retirement...just doesn't add up.

Sometimes I feel I should take my pile of marbles and move to another "younger" country...i.e. one that doesn't have the same oncoming trainwreck of demographics...course I don't know what country that would be.
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Re: baby boomers article
Old 03-05-2006, 12:01 PM   #17
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Re: baby boomers article

Alec Baldwinia.
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Re: baby boomers article
Old 03-05-2006, 12:28 PM   #18
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Re: baby boomers article

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Originally Posted by rs0460a
Believe me, I'm not complaining* :; I just want to understand their "data mining" for these "facts"*
This is just a guess, but, seeing as the article appears on the Bureau of Labor Statistics site, I would assume the savings data comes from census data. Here again, it is open for scrutiny. I wonder how one would show up with Wife and Husband IRAs, 401Ks, savings outside retirement plans, two defined pension plan, and SS. What income was studied is important. Recently there was big news about how the Savings Rate was at the lowest ever, however, it did not include IRAs or other 401K type savings.
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Old 03-05-2006, 02:12 PM   #19
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Re: baby boomers article

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Originally Posted by Cute n' Fuzzy Bunny
Alec Baldwinia.
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Re: baby boomers article
Old 03-05-2006, 02:22 PM   #20
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Re: baby boomers article

Old Mcdonald,

The original article states that BBs have "savings and other income sources" to replace 50% of their income. *For the average retiree SS may be a much larger portion of their income than savings than for an RE. *An example scenario follows:

- Average pre-retirement income of $40k
- Assume that SS is $15k (these guys have been working 40 years)
- For pension assume that it is half of the pre-retirement income but that only 25% of retirees have a pension so on average the pension is (0.25)($20k) = $5k
- For savings using the 4% rule for $80k gives only $3k/year for savings

The percent of pre retirement income is then: *(100)(15+5+3)/40 = 58%

I'm to lazy to check my assumptions for SS and pension and since the calculation is very sensitive to those assumptions there may significant error there.

On a different note, the person in the above scenario will be in a lot of trouble if SS benefits decrease. *As you know and as Rustic23 mentioned this will probably be a major political issue.

C-T the person in the above example may opt to exert his political muscle to maintain SS and live off of that rather than continue to work? *They'll probably look around to find new things to tax. *Maybe a tax on all of those "rich" REs *

MB *

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