Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
You guys have to read this...very interesting
Old 05-05-2005, 07:37 PM   #1
Thinks s/he gets paid by the post
wildcat's Avatar
 
Join Date: Feb 2005
Location: Lou-evil
Posts: 2,025
You guys have to read this...very interesting

I posted this here b/c more people would read it. I skimmed some of the article but here it is:

Baby Boomers and young Americans who furiously worked to buy up as many stocks and bonds as they could.

But the time for work is ending, and the time to "retire" and enjoy these accumulated assets is close at hand.

As the WSJ notes today, many experts are predicting a future market meltdown that will leave U.S. retirees with much less to show for their years of hard work.

One noted Wharton School finance professor, Jeremy Siegel, is warning that over the next 50 years, the anticipated wave of baby "boomer retirees with trillions of dollars of assets to sell over the next 20 to 40 years threatens to crush stock and bond prices."

It is important to note that Siegel has long been a market bull. But he has changed his mind, and today claims a U.S. market collapse is imminent unless the market receives a massive influx of investment from developing nations like China and India.

Over the next 30 years, the ratio of workers to retirees is expected to drop to 2.6-to-1 from the current 4.9-to-1. And the fear is that stock prices will collapse as retirees dump everything they have into a flimsy market to maintain their lifestyle and health.

According to Siegel, a few simple calculations reveal that there is a major problem looming.

"I don't think there will be enough assets from U.S. sources going forward to pay for people's retirement," says Siegel.

Siegel asserts that statistics on future life expectancy, immigration, productivity and taxes all suggest that there is no possibility retirees will be able to sustain even 90% of the standard of living they enjoyed while in the workforce.

He claims this will spur retirees to sell off everything they have in a desperate bid to salvage their comfortable lifestyles.

But unless there is foreign intervention, Siegel says, the disparity between buyers and sellers will drive down stock prices, putting a huge dent in the value people will be expecting from their assets.

Siegel's research suggests that between now and 2050, there will be a whopping $123 trillion deficit between what retirees will require to maintain their lifestyle and what they'll receive.

Interestingly, that gap would be erased if people simply waited until their 70s to retire.

An analysis of other countries proved shocking.

Many developing nations were projected to drastically increase their wealth.

And Siegel feels that their newfound fortune could salvage the U.S. market, essentially subsidizing the boomer retirement.

"By the middle of this century, I believe the Chinese, Indians and other investors from these young countries will gain majority ownership in most of the large global corporations," says Siegel.

But "if the Chinese and the Indians don't come in, it will be bear market times."

For sure, not all "experts" agree with Siegel.

One economist at the International Monetary Fund, Robin Brooks, says there is no danger since the affluent Americans who own a substantial portion of U.S. stocks will not be forced to sell their assets. He also believes that companies will increase dividends to help retired investors hang on.

However, noted economist Milton Friedman completely disagrees, saying he currently sees no real problem. He feels retirees will be satisfied keeping their stocks and bonds while simply living off any interest, pensions or dividends they receive.

But neither Brooks nor Friedman offers an adequate explanation of how the systems can remain solvent without selling off assets - when they will have less workers paying into pension systems.

Yale economist John Geanakoplos says that for the past 40 years baby boomers have undeniably influenced stocks in every decade. And he feels that will continue.

"Baby boomers are reaching the end of the line and soon are going to have to be selling," he says. "We should not rationally expect the same rates of return on our investments that our parents did."

Brooks is aware that the richest 10% of Americans own about 88% of all stocks held.

And he says it is ludicrous to think that this segment will suddenly dump all their holdings. And he doesn't believe we can accurately predict where emerging countries will be spending their new wealth.

He claims the real issue that needs to be addressed is: What do we do about the millions of American retirees who haven't saved?

Neither the Journal nor the experts they cite explain how we will offset the enormous Baby Boomer demographic that will affect not only the United States, but Western Europe and Japan.

Already, the cracks are beginning to show, as private pension systems are coping with waves of boomers who are retiring early.

__________________

__________________
"These walls are kind of funny. First you hate 'em, then you get used to 'em. Enough time passes, gets so you depend on them"
wildcat is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: You guys have to read this...very interesting
Old 05-05-2005, 07:39 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: You guys have to read this...very interesting

Hmm...so something bad might happen in the next 30-50 years?

Quite a nostradamus.

How about baby boomers spending a gazillion dollars in their retirement, boosting the economy?
__________________

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-05-2005, 09:12 PM   #3
Thinks s/he gets paid by the post
wildcat's Avatar
 
Join Date: Feb 2005
Location: Lou-evil
Posts: 2,025
Re: You guys have to read this...very interesting

I suppose I will take up residence in a cave around the 50 year mark.
__________________
"These walls are kind of funny. First you hate 'em, then you get used to 'em. Enough time passes, gets so you depend on them"
wildcat is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-05-2005, 09:49 PM   #4
Recycles dryer sheets
VoyT's Avatar
 
Join Date: Feb 2005
Posts: 445
Re: You guys have to read this...very interesting

Quote:
Siegel's research suggests that between now and 2050, there will be a whopping $123 trillion deficit between what retirees will require to maintain their lifestyle and what they'll receive.

Interestingly, that gap would be erased if people simply waited until their 70s to retire
* *Hmm...* is this another entry in the "Don't Retire" campaign?
__________________
"Coffee: the finest organic suspension ever devised." -- Kathryn Janeway
VoyT is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-05-2005, 09:59 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Dec 2002
Posts: 3,875
Re: You guys have to read this...very interesting

I saw something on tv about this. They were discussing
increasing the retiremnet age for SS and interviewing people to get their
opinions of that particular option. I recall they talked to a guy
running a small construction company. He thought the idea of someone
being able to do what he did until they were 70 was
ludicrous. I am only 60 and my ability to any sort of manual work
is greatly diminished. So, lifespans may be getting longer, but that
does not mean people will be able to do the job they were trained in,
which I suppose brings us back to the burger-flipper/Walmart
greeter discussion.

JG
__________________
MRGALT2U is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 12:09 AM   #6
Moderator Emeritus
laurence's Avatar
 
Join Date: Feb 2005
Location: San Diego
Posts: 5,234
Re: You guys have to read this...very interesting

the thought that the 10% of americans who actually save a significant amount in the stock market compares to the trillions that will be pouring in from China/India is laughable. We live in a microcosm, most of my coworkers have almost nothing saved, and I don't think they are atypical. Most of their plans consist of: low mortgage, company pension, social security. I mean, this one guy in the news (forget his name) is planning on doubling his holding in GM to 8%. 8% with one billionaire!!! Working man is a flea on the back of a rhino.
__________________
laurence is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 06:26 AM   #7
Thinks s/he gets paid by the post
BUM's Avatar
 
Join Date: Feb 2004
Location: Mid Hudson Valley
Posts: 1,778
Re: You guys have to read this...very interesting

Quote:
Originally Posted by wildcat

However, noted economist Milton Friedman completely disagrees, saying he currently sees no real problem. He feels retirees will be satisfied keeping their stocks and bonds while simply living off any interest, pensions or dividends they receive.

I agree with Uncle Miltie. I've read Free To Choose and The Definition of Money. Most of his other works are over my head. But wildcat's paraphrase above is what I intend to do.

BUM
__________________
In a panamax down by the river.
BUM is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 07:20 AM   #8
Recycles dryer sheets
 
Join Date: Jan 2005
Posts: 322
Re: You guys have to read this...very interesting

Quote:
Originally Posted by MRGALT2U
He thought the idea of someone
being able to do what he did until they were 70 was
ludicrous.* I am only 60 and my ability to any sort of manual work
is greatly diminished.* So, lifespans may be getting longer, but that
does not mean people will be able to do the job they were trained in,
which I suppose brings us back to the burger-flipper/Walmart
greeter discussion.

JG
Maybe so with manual labor. Know quite a few physicians still practicing medicine, full-time.* Know one personally who was recalled back to the service and is practicing in the Mid East.* Know personally just a few surgeons still practicing, one neurosurgeon who has dibs on the prime morning OR slots, does his couple of protruding back disc repairs, then heads out to the golf course for the rest of the day. Granted he no longer mucks around in the brain.
Add to the above, engineers and lawyers consulting.* Either I know alot of over 70's, or this ain't that rare.

Maybe something about that Aesop's fable the tortoise and the hare...
__________________
P.S. is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 07:35 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,409
Re: You guys have to read this...very interesting

Uncle Miltie is an old phart - and remembers De Gaul and the Norwegian widow.

Siegal has the problem of the current age - thinking that numbers tell all (digits, spreadsheets, etc.). He should read up on 'the good side of chaos theory' and reread Adam Smith's Invisible Hand.
__________________
unclemick is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 08:03 AM   #10
Thinks s/he gets paid by the post
Eagle43's Avatar
 
Join Date: Jan 2005
Location: DFW
Posts: 1,883
Re: You guys have to read this...very interesting

Cockie Lockie the sky is falling; the sky is falling. Spare me and stick with Uncle Miltie, and Bogle.

When the boomers actually start using their IRA/401k/pension money, expect the U.S. economy to boom. And, BTW, the U.S. government will prosper by taxing the withdrawals. Further, if the boomers don't spend it, their descendants will.

Why is it that all this doom and gloom is directed to people who actually save and invest? Direct it towards the non-savers; They need it.
__________________
Resist much. Obey Little. . . . Ed Abbey

Disclaimer: My Posts are for my amusement only.
Eagle43 is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 08:39 AM   #11
Thinks s/he gets paid by the post
wildcat's Avatar
 
Join Date: Feb 2005
Location: Lou-evil
Posts: 2,025
Re: You guys have to read this...very interesting

<<<<< I am curious as a cat as you know so I have to ask what you guys think about pension problems? Fiction or reality? From what at I have read it is a reality. Read some article a year or so ago and it was about how good old librarians collected a huge pension when they retired. I guess the point being that some pension plans are a bit generous to say the least, especially in some states (California I believe) and the governments don't have the money to pay. I guess I shouldn't be surprised if I see a librarian on the Forbes 400 list - Mary, residence - Malibu, CA., source - Librarian for 25 years. And I hope you all spend spend spend in retirement.
__________________
"These walls are kind of funny. First you hate 'em, then you get used to 'em. Enough time passes, gets so you depend on them"
wildcat is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 08:43 AM   #12
Thinks s/he gets paid by the post
 
Join Date: Dec 2002
Posts: 3,875
Re: You guys have to read this...very interesting

Even taking out the manual labor there is work for me to do,
if I wanted to do it. *Here are my best friends (all about my age or older) that still work, and what they are doing right now:

Farmer, 60. *Farms (big time) and runs an Ebay biz on the side.

Retired dentist, 68. *Fills in for other dentists and teaches at the
local community college.

Small business owner, 68. *Still works, selling mostly.

Small business owner, 60. *Works full time.

Attorney, 68. *Manages his family's investments (staff of 3).

Realtor, 67. *Still sells real estate full time.

Attorney, 60+. *Owns and runs 3 small businesses.

Executive, 60. *Runs a small manufacturing company.

All of these people seem to be happy doing what they do. *Maybe you either have (or, as in my case develop) the desire to just loaf or you don't.

JG

__________________
MRGALT2U is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 10:27 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,409
Re: You guys have to read this...very interesting

Even after eleven years, periodic brain pharts occur - part time work, small business ideas, etc.

I recognize them for what they are - pharts - and get back to the serious business of 'doing nothing in particular.' aka ER.
__________________
unclemick is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-06-2005, 01:13 PM   #14
 
Posts: n/a
Re: You guys have to read this...very interesting

Quote:
Originally Posted by MRGALT2U
...Here are my best friends (all about my age or older) that still work, and what they are doing right now: ...
Interesting. Looks like all (or most) of the old friends you listed are their own bosses.
__________________
  Reply With Quote
Re: You guys have to read this...very interesting
Old 05-07-2005, 04:19 AM   #15
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 557
Re: You guys have to read this...very interesting

Wildcat
Bill Gross at Pimco wrote about the issue in* a slightly different way.* He wrote:

"Rob Arnott of Research Affiliates LLC, sub-advisor of PIMCO’s all asset strategy and a co-collaborator with Peter Bernstein on several articles about risk and future asset returns, has advanced what I consider to be the most realistic take on Social Security and Medicare trust funds. Pre-funding these systems, he argues, "is basically irrelevant." And (in my own words) it matters little whether the system is pre-refunded with Treasury bonds or privately held stocks. The fact is that both of these financial assets represent a call on future production. If that production could possibly be saved, like squirrels ferreting away nuts for a long winter, then Treasury IOUs or corporate stocks might make some sense. But they can’t. Future healthcare for boomer seniors can only be provided by today’s teenagers, twenty-somethings, and even the yet to be born. We cannot store their energy today for some future rainy day. Nor can we save food, transportation, or entertainment for anything more than a few years forward. Each must be provided by the existing generation of workers for those who have retired and are presumably incapable of working. And, as Chart I points out, the ratio of retirees to workers - the dependency ratio - soars from 0.2 retirees for every worker to 0.35 over the next 20 years or so. There’s your problem, and neither privatization nor any goodly number of government bonds deposited in the Social Security trust fund can solve it. While these paper assets may "pay" for goods and services, their value will be market adjusted in future years to exactly match the quantity of things we buy, and that quantity will be substantially a function of the available workforce and the price they command for their services. This is a concise way of saying that the value of Treasury bonds and even stocks will be valued down in price as they are sold to pay for future goods and services, and that the price of these goods and services will be marked up (inflation) to justify their reduced supply."

The entire article is at:http://www.pimco.com/LeftNav/Late+Br...O_Feb_2005.htm

So basically he is saying that if our economy produces enough goods and services financial assets do not need to crash.

Uncledrz
__________________
uncledrz is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-07-2005, 05:39 AM   #16
Thinks s/he gets paid by the post
BUM's Avatar
 
Join Date: Feb 2004
Location: Mid Hudson Valley
Posts: 1,778
Re: You guys have to read this...very interesting

Quote:
Originally Posted by parnass
Interesting. Looks like all (or most) of the old friends you listed are their own bosses.
Of course they are. After 60 who wants us? Fortune 500 corporations? Only those with dummed-down paper hat jobs.

BUM
__________________
In a panamax down by the river.
BUM is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-07-2005, 06:08 AM   #17
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,118
Re: You guys have to read this...very interesting

Quote:
Originally Posted by MRGALT2U
Fills in for other dentists...
I gotta million of 'em...

REW
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-07-2005, 09:16 AM   #18
Thinks s/he gets paid by the post
 
Join Date: Dec 2002
Posts: 3,875
Re: You guys have to read this...very interesting

Quote:
Originally Posted by REWanabe
I gotta million of 'em...

REW
Yeah, me too. Unfortunately DW has heard about 999,000
of them. I saved a few for you folks though

JG
__________________
MRGALT2U is offline   Reply With Quote
Re: You guys have to read this...very interesting
Old 05-07-2005, 09:23 AM   #19
Thinks s/he gets paid by the post
 
Join Date: Dec 2002
Posts: 3,875
Re: You guys have to read this...very interesting

Quote:
Originally Posted by parnass
Interesting.* Looks like all (or most) of the old friends you listed are their own bosses.
Yes, parnass............ that is true. The only possible exception would be the realtor who theoretically works for a big company, but actually
just uses their office and name and splits the commissions.
I did not notice the "their own bosses" thing until after I posted the
list. IMHO, that is why most of them are still working and more
importantly why they all (to a man) seem to enjoy what they do.
Not everyone is cut out to be on their own, but I think
there is a message here.

JG
__________________

__________________
MRGALT2U is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Anyone read "Wealth: Grow It, Protect It, Spend It and Share It" by Stuart Lucas titaniumboy Life after FIRE 7 07-17-2006 01:02 PM
Interesting new "loan" site Olav23 FIRE and Money 14 02-07-2006 08:03 PM
Read Any Good Books Lately on FIRE? RatherBeFishn Life after FIRE 17 04-18-2005 11:54 AM
Anyone read Roger Gibson's Book? moguls FIRE and Money 2 08-31-2003 07:50 AM

 

 
All times are GMT -6. The time now is 07:23 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.