Baby Boomers are Now Delaying Retirement

[Retire Soon]

The events of the past few weeks on Wall Street are causing many Baby Boomers to consider spending more years in the w*rk force before retiring.

With the spend and borrow mentality Americans have embraced, especially over the past decade, it should come as no surprise that savings took a back seat to McMansions, luxury suv's and exotic vacations.

WSJ published the results of a recent survey by Employee Benefit Research Institute which showed the percentage of people over the age of 55 who had reached certain savings and investment levels:

Less than $10,000 --28%

$10,000 to $24,999--8%

$25,000-49,999--- 7%

$50,000-$99,999-- 16%

$100,000-$249,999--18%

$250,000 or more-- 23%

It is very sad how Americans who have been overly influenced by mass advertising and peer pressure to keep up with the Joneses have misplaced their priorities and will now will suffer the consequences by having to w*rk longer than what was originally planned. Deferred gratification is quickly disappearing and has been supplanted by our need to impress others with lives of extravagance.

Baby Boomers Delay Retirement - WSJ.com

 

[audreyh1]

Yes, it's very sad except that those of us who DID NOT buy into the high times lifestyle are just fine. We're the ones who get to retire. So maybe it's not so sad after all.

When it comes down to it, I just don't have much sympathy for someone "seduced" by the McMansion etc. lifestyle. They made their choices and so they pay the consequences. People who can't delay gratification deserve to work longer - simple as that and fine with me. It's not like people who chose that lifestyle were helpless.

Audrey

 

[CuppaJoe]

A little off the point but this topic reminds me of my application for an apt. back in '93. I responded to a question about savings accounts with a big fat zero both because I didn't have a savings account and I didn't want a potential landlord to know that I had money in brokerage accounts.

I wouldn't fill out a survey like the one described here. I'm a baby boomer who gave notice in early July and retired at the end of August knowing full well that conditions had changed. What do voluntary surveys skew toward?

 

[dex]

I just glanced at the article. One weakness I see in most similar articles is historical perspective.

These numbers might be great or they might be terrible compared with the past.

These numbers could be worse if debt (excluding mortgages) was taken into account.

The first half of the baby boomers - 1947 to 55 -had the greatest opportunity for financial greatness because they followed the baby bust.

 

[dex]

When it comes down to it, I just don't have much sympathy for someone "seduced" by the McMansion etc. lifestyle. They made their choices and so they pay the consequences. People who can't delay gratification deserve to work longer - simple as that and fine with me. It's not like people who chose that lifestyle were helpless.
Audrey

I agree with this sentiment and I think more and more people (maybe not the media) will come to the same conclusion. It may also expand to those who took out mortgages that couldn't afford them.
The age of feeling sorry for the victims of self inflicted wounds might be over.

 

[W2R]

"Baby Boomers are Delaying Retirement".

Oh, really? Not this baby boomer...

Just 411 more days, 410 tomorrow.

 

[Gardnr]

Yes, it's very sad except that those of us who DID NOT buy into the high times lifestyle are just fine. We're the ones who get to retire. So maybe it's not so sad after all.

When it comes down to it, I just don't have much sympathy for someone "seduced" by the McMansion etc. lifestyle. They made their choices and so they pay the consequences. People who can't delay gratification deserve to work longer - simple as that and fine with me. It's not like people who chose that lifestyle were helpless.

Audrey

Yeah, boo hoo!

They've made their bed (and soiled ours a bit too ), now they can bloody well lay in it, and pay their high utility bills to heat that 4000 SF beast. And don't come asking us for money!!

 

[FIREd]

The last 3 decades provided a very fertile ground for building wealth in America. Many took advantage of it and are now sitting pretty. But others preferred to squander their mounting riches on "toys" and "status symbols". Honestly, I can't feel sorry for them. They had their fun driving around town in their leased Jags, living in McMansions they could not afford, living a life which they could only afford by borrowing from their future. Well the bill's coming due.

 

[audreyh1]

Yep - several long term rising costs above and beyond the mortgage payment on McMansions: big utility bills, property taxes, and often a long commute. You really get killed on costs incurred - AND they're going up fast!

Audrey

P.S. you have to suffer the expenses (time and money) of a long commute because you still have to work to afford the house! Talk about a catch-22 treadmill!

 

[ziggy29]

I think this could delay retirement even for those who are living below their means and saving aggressively for retirement. But at least for this group, there still is a plan to retire at an age most would consider fairly fortunate. Those who don't have much at all saved -- especially if they are in considerable debt and don't have a large pension coming -- may be working until they drop dead.

 

[playaman]

I don't sympathize much either with fellow baby boomers who are allegedly delaying retirement. My portfolio is down more than 1/3 and my stock options are underwater, but I don't really care. My wife and I "lived below our means" for years, anticipating a market meltdown could take place. Others had the same option. It does not take great intellect to know how much you need to retire on and then plan accordingly. Anything else is just gravy ...

 

[Retire Soon]

Yep - several long term rising costs above and beyond the mortgage payment on McMansions: big utility bills, property taxes, and often a long commute. You really get killed on costs incurred - AND they're going up fast!

Audrey

P.S. you have to suffer the expenses (time and money) of a long commute because you still have to work to afford the house! Talk about a catch-22 treadmill!

An example of this might be Riverside County in California. Many tract homes sprung up overnight in cities such as Temecula, Lake Elsinore, and Murrieta.

There are not a whole lot of high-paying jobs in these areas, so it makes for a long commute. A lot of these residents are first time homebuyers, so they may be in the early accumulation phase of their lives, which makes it even more difficult. The rising cost of the commute coupled with rising mortgage payments must surely tip many over the edge into financial ruin.

I am sure there are many other communities across the U.S. that meet the same description.

 

[growing_older]

I think it's hard to understand surveys such as this without more info. Does the "savings" number reported include 401k and IRA, or are those "pension" related so not considered savings. What about home equity? What about value of a real COLA pension, which probably counts as zero in the survey, but is really quite valuable. And there's also the problem of skew if the respondents are cautious about giving out such info. If strangers ask, I'm likely to significantly under-report any assets or income. Maybe folks in this survey did, too.

 

[Retire Soon]

I think it's hard to understand surveys such as this without more info. Does the "savings" number reported include 401k and IRA, or are those "pension" related so not considered savings. What about home equity? What about value of a real COLA pension, which probably counts as zero in the survey, but is really quite valuable. And there's also the problem of skew if the respondents are cautious about giving out such info. If strangers ask, I'm likely to significantly under-report any assets or income. Maybe folks in this survey did, too.

The study excludes home equity and Defined Benefit Plans. It says nothing about not including 401k, 403b, IRA, or 457, so I believe "Savings and Investments" includes these tax shelters as well. This was a telephone survey that reached 1,322 people. If it is a good statistical analysis, they probably used a representative sample which should be accurate. The margin of error is + or - 3%. Here is a link to the complete study:


http://www.ebri.org/files/RCS08_FS2_Saving.pdf


Here is a link to "Employee Benefit Research Institute"

Employee Benefit Research Institute - EBRI

 

[Beryl]

I agree w/"growing older" and will review the provided details. I'd like to know exactly what and how the questions were asked. This comment was interesting, however:

Even retirees who have been prudent with their nest eggs say they're facing tough times -- and tough decisions. "We weren't extravagant people. We didn't go on cruises. We didn't buy a Cadillac. And here we are, we thought we could retire, but our savings are just going too fast for us," says Noreen Hilinski, a 67-year-old retiree in Madison, Conn. Her financial planner told her recently that she and her husband, a 69-year-old retired engineer, have used about 10% of their investments.

An unexpected and/or uncovered illness can foil a prudent saver's plan to RE. Also, I'm not comfortable with how these bail-outs will affect those of us who have done "everything right".

 

[growing_older]

My first "retirement plan" was to figure the least amount of savings I needed to eke out a living with minimal expenditure. With greater experience I now know that plan would have failed miserably. I've lived through enough unexpected downturns and market oddities, that I'm now planning for a generous safety margin in my retirement savings plans. I suspect that plans without such margins in them are exposed to significant risk of running out of funds before the plan predicted it would.

 

[dex]

http://www.nytimes.com/2008/09/23/business/23retirees.html?hp

More to Fear in World of Retirees

 

[deserat]

Defined benefit plans usually don't payout until 55-65 with the benefit at 55 50% of that at 65 - and usually not COLA'd - hence the reason for needing other savings/investment vehicles in addition to that. Additionally, many of the companies that provided the DBPs have done away with them....

As for buying houses way outside of where one works, that is de riguer for CA and will be for awhile - actually, if you have the money, NOW is probably the time to buy in CA.

As for surveys like this - yes they may be flawed (all are in some way or another), however, I believe it does show a range or trend - my main concern is that those people who have saved and have assets will be tapped buy those who didn't save....the age old ant and grasshopper fable. That's why I believe understanding the tax ramifications of one's investments and spending becomes much more important to the savers.

Sort of on topic - just read an article where many $Million homes are now foreclosing - they started the article with a man who made $250K/year buying a $2.5M house - his monthly payments were $10,520....that's close to 50% of his pay...and taxes probably take a huge chunk. Of course no mention in the article of how perhaps that was quite a risk he took purchasing a house 10X his yearly pay and paying 50% of his income monthly for that mortgage - the numbers may be higher numbers, but the percentages still hold. The real purpose of the article was to moan about how the rich are affected by this 'crisis' as well as the poor. Hmmm, perhaps they are all 'poor' in their understanding of some basic financial tenets.

 

[FIREd]

A new federal study has found that, as of 2008:

1) The median net worth of households headed by someone 65 or older is $196,000 (including home equity). That's almost 80% higher than 20 years ago (adjusted for inflation), but the number of private workers covered by a traditional pension plan has dropped by 34% since 1993.

2) The average 65 year old will live another 19 years on average, which is good news. But healthcare costs are expected to increase accordingly.

AgingStats 2008 Report

 

[SarahW]

Yes, it's very sad except that those of us who DID NOT buy into the high times lifestyle are just fine. We're the ones who get to retire. So maybe it's not so sad after all.

When it comes down to it, I just don't have much sympathy for someone "seduced" by the McMansion etc. lifestyle. They made their choices and so they pay the consequences. People who can't delay gratification deserve to work longer - simple as that and fine with me. It's not like people who chose that lifestyle were helpless.

Audrey

Yeah, boo hoo!

They've made their bed (and soiled ours a bit too ), now they can bloody well lay in it, and pay their high utility bills to heat that 4000 SF beast. And don't come asking us for money!!

Why all the hate for McMansion owners? Geeze, get over it. I'm a boomer, live in a mortgage-free McMansion, and drive a big-ass SUV. I also "get to retire" whenever I choose and you are correct, I chose this lifestyle and I am not helpless. And no worries, I can still easily pay my utility bills so relax, I won't be asking you for money.

Seems a lot of painting situations with a broad brush here.

 

[Gardnr]

Why all the hate for McMansion owners? Geeze, get over it. I'm a boomer, live in a mortgage-free McMansion, and drive a big-ass SUV. I also "get to retire" whenever I choose and you are correct, I chose this lifestyle and I am not helpless. And no worries, I can still easily pay my utility bills so relax, I won't be asking you for money.

Seems a lot of painting situations with a broad brush here.

Well then you're clearly not one of those being referred to here. But there are A LOT of Americans who've bought into the oversized lifestyle and couldn't really afford it and now are moaning about how high energy costs are, etc.

I've heard them first hand.

 

[chinaco]

I can understand why people might decide to delay retirement at this time. Part of it would depend on how much cushion they felt they had in their money.

If one's nest egg just meets their income needs... they might be less confident about making ends meet.

I would be inclined to wait until the smoke clears.

I am still planning on ER... However, my planned FIRE date is still 3 years away. I am hoping everything has shaped up by then. I am confident that it will.

 

[Budman]

"Baby Boomers are Delaying Retirement".

Oh, really? Not this baby boomer...

Just 411 more days, 410 tomorrow.

Not this baby boomer either! I have done the just one more year thing for the last couple of years and I am putting a stop to it. Enough is Enough! Sure, I'm missing my goal nest egg since the market has been unfriendly this past year, but I'm not going to let it change my mind. I have 95 days to go.

 

[oma]

"Baby Boomers are Delaying Retirement".

Oh, really? Not this baby boomer...

Just 411 more days, 410 tomorrow.

292 here - although I have a retirement check to count on, I sacrificed luxury in order to save $$$. Can't feel too sorry for those who had to have that big house, expensive car, and all those cruises.

 

[W2R]

Not this baby boomer either! I have done the just one more year thing for the last couple of years and I am putting a stop to it. Enough is Enough! Sure, I'm missing my goal nest egg since the market has been unfriendly this past year, but I'm not going to let it change my mind. I have 95 days to go.

Good for you!! The "one more year" thing can stretch on forever, or so I've heard. I wish I was that close to ER. You are SO CLOSE....

292 here - although I have a retirement check to count on, I sacrificed luxury in order to save $$$. Can't feel too sorry for those who had to have that big house, expensive car, and all those cruises.

Me too, although in my case it didn't seem like much of a sacrifice (I am one of those who just never increased spending as my salary increased).

I just looked at my Wellesley dividend that came in Thursday, and to me the amount is breath-taking. I am sure that to those baby-boomers who gave in to their perpetual shop-a-holic urges, it wouldn't seem like so very much but it is more than my present budget and it sure raises my confidence about ER (especially since Wellesley is less than 30% of my portfolio at present). Life is good and I believe I am going to slide into ER without a hitch.

And this morning, I only have 406 more days to go. Waiting for lifetime medical.