Affluent Boomers

[mickeyd]

This article refers to "affluent boomers", but with an average net worth of a bit over $250k, that seems a bit low to be referred to as affluent.

The survey reports that the majority (77%) of boomers born in 1946 report being in good to excellent health; with net worth, (excluding home value) averaging $257,800 and average annual income approximately $71,400.

Timmermann asserts that this is the first time that the oldest baby boomers, including their lifestyles, perceptions and plans, have been examined in such detail. “Despite the social and political turbulence of their youth, these leading-edge boomers have established very traditional lifestyle characteristics.

Affluent Boomers Feel Young

 

[haha]

This article refers to "affluent boomers", but with an average net worth of a bit over $250k, that seems a bit low to be referred to as affluent.

Look at the income; sounds pretty good to me. I read an article about the first boomers reaching age 62 this year. It stated that 2/3 have employer provided pensions and health care.

I have a brother who never saved a dime; yet as a public school teacher he retired with a $65,000+ pension and essentially free healthcare. Add some SS, and whatever his girlfriend brings- or even if she is just a breakeven, he is sitting pretty.

Lots of retirees buy big fancy houses, using their savings for down payments and furniture and lawn tractors and toys. They don't really need much in the way of savings, because their perqs and entitlements are so good.

Why worry about net worth when you know that another $6-10 thousand will arrive in your bank account the first of each month?

Ha

 

[UncleHoney]

Affluence aside, what I found interesting was that most "boomers" are turning out to be just your average "Joe" in their old age. A little contrary to what the media has often forced on us over the years with boomers this and boomers that.

Of all the things "boomers" have done in their lives and things they have accomplished, out of a group of 78 million strong, not a single one has ever set foot on the moon. That was an accomplishment of their parents and grandparents.

 

[FinanceDude]

In a few years, there will be a split study between "boomers with pensions" and "boomers without pensions"..........

Seems to me, the early boomers (1945 - 1955)will be doing better than the later boomers (1956-1964)..........

 

[Notmuchlonger]

"Why worry about net worth when you know that another $6-10 thousand will arrive in your bank account the first of each month?"

Ya My FIL retired over 20 years ago at 62 for the state of CA. He was in a fairly high ranking position. Guy retired with something like 105% pension and health care. They dont do that anymore but damn that would be nice.

While my wife will be retiring in a few years with basically 30 to 35k towards health care and what amounts to 17k non cola pension.

 

[lazygood4nothinbum]

Seems to me, the early boomers (1945 - 1955)will be doing better than the later boomers (1956-1964)..........

i'm a late bloomer

 

[emilylynn]

This statistic seems more or less consistent with what I've read elsewhere. The thing that perplexes me is the total disconnect between the net worth of the average "affluent" 59-year-old and the $1-4 million that most estimate will be needed for a safe and comfortable retirement. Just how does a net worth of $250K hold up when subjected to the 4 percent withdrawal rule? That's a freaking $10,000 a year! I just don't understand how this is all supposed to work out.

 

[haha]

Just how does a net worth of $250K hold up when subjected to the 4 percent withdrawal rule? That's a freaking $10,000 a year! I just don't understand how this is all supposed to work out.

It obviously doesn't. What we spend is income, not net worth. If these people are not deluded, what they spend is something that some but not all of us have-income that does not depend on assets. Think pension! Think social security! Think retireee medical coverage!

OTOH, they may be deluded and believe that a 30% WR is a good choice.

Ha

 

[Alan]

This statistic seems more or less consistent with what I've read elsewhere. The thing that perplexes me is the total disconnect between the net worth of the average "affluent" 59-year-old and the $1-4 million that most estimate will be needed for a safe and comfortable retirement. Just how does a net worth of $250K hold up when subjected to the 4 percent withdrawal rule? That's a freaking $10,000 a year! I just don't understand how this is all supposed to work out.

In some circles you can add a pension to to your net worth calculation. eg to get a $50k/year COLA pension you need $1.25M at a withdrawal rate of 4%. So, someone with savings, home equity etc of $250K plus a COLA pension of $50K has an equivalent net worth of $1.5M needed by someone who has no pension.

 

[REWahoo]

Look at the income; sounds pretty good to me. I read an article about the first boomers reaching age 62 this year. It stated that 2/3 have employer provided pensions and health care.

Was it this one?

The oldest boomers are in better shape for retirement than thought

"...Americans born in 1946 are in relatively good financial shape and seemingly entirely different from other boomers. Maybe that's because only 2% of them report that they attended Woodstock."

"But what's especially telling about this group's financial health is this: While roughly 80% of Americans take Social Security at age 62, this group ... will not. Just one-third said they plan to take Social Security when they turn 62; the rest plan to take Social Security at age 65 or later."

Apparently 1946 was a very good year...

 

[Spanky]

In some circles you can add a pension to to your net worth calculation. eg to get a $50k/year COLA pension you need $1.25M at a withdrawal rate of 4%. So, someone with savings, home equity etc of $250K plus a COLA pension of $50K has an equivalent net worth of $1.5M needed by someone who has no pension.

Does that mean that the government needs to allocate large funding for each pension recipient? It seems ironic that the current focus is on its possible inability to fund social security or medicad or medicare program in the future but not the pension programs funded by local, state or federal government. I will be mad if they cut (or terminate) social security or medical care benefits but continue to pay pension benefits (that are much more generous than those of SS).

 

[barbarus]

Insurance company article.

It's poo.

 

[old woman]

Having income at 61-62 doesn't mean you will have income in retirement. 74K income is great but if it suddenly goes to zero the net worth won't help much. We seem to think we can work until we die. Many people are forced into retirement or slowly become unable to continue. My boyfriend is 60 and sprained his ankle in a minor motorcycle accident Sunday, he will be out of work two weeks and even when he earns more than 74K missing a couple of weeks work hurt him. He will have three tiny pensions and SS in retirement so his income will be well under half his working income. He has his head buried in the sand thinking he can do labor much longer.

 

[SteveR]

"..To be sure, this may be as good as it gets for baby boomers. After this, surveys will likely find that fewer and fewer boomers have traditional pension plans, fewer and fewer boomers will have retiree health care and fewer and fewer may be as secure in retirement. But for 62-year-olds, Camelot may have arrived."

The wave of early Boomers may indeed have it better than those in later waves. Post WWII Boomers should have a better pension than those in later periods and will also have 401k or similar programs to fall back on for even more money. Paid or partially paid group health insurance should be fairly common with the early Boomers.

Mid Boomers (Korean War Kids) the next wave and will have it a bit less plush due to later in life pension reductions and very little time to make up the difference with 401k like plans. Health insurance may or may not be covered and is so it will have a much larger out of pocket price than the earlier boomers.

Later boomers will have a mixed bag. Some will have pensions, 401k, subsidized health insurance and individual accounts. Others will have been scewed by Mega Corps through loss of pensions and reduction and/or elimination of health covers subsudies. The market loss in 2000 would seem to affect them the most since they would have tended to invest in High Tech Bling Bling without a balanced portfolio.

Gen X and newer generations will have a very tough time with ER in large numbers due to the lack of subdized benefits available to them. They will have to have much much more in personal IRA accounts to cover their ER. This takes a bigger bit from the personal budget and a well balanced portfolio to keep it growing in all market times.

Retirement income and the various standards of living will vary about as much as they did prior to retirement. Those that have will still have. Those that have not...will have only what the gov. is willing to give away. The rest are in the very large middle with individual personal living standards all over the place.

My mother lives in an Assisted Living center. Her room and board and minor medical care run $36,000/yr. Her total income from all sources is less than this and is derived from a teacher's pension of $24000 and SS. In the same facility there are folks who clearly have much much more new worth yet pay the same in room and board. I guess in the end, Nursing Homes will be the great leveler of us all.

The article has some interesting points but could have fleshed out how all this will affect the later waves of Boomers.

I am the youngest retiree in my family. My older brother plans on working until he is 62 or so. My dad worked to manditory retirement at 65 and my mom took an "early" retirement at 63.

 

[W2R]

We seem to think we can work until we die. Many people are forced into retirement or slowly become unable to continue.

So true! Also, we seem to think we will never need assistance and can always live on our own. That is not true, and a good, pleasant, compassionate continuous care facility is not cheap. I would imagine that when the baby boomers hit these facilities, they will be in such demand that they will become frightfully expensive.

People don't want to face the fact that aging occurs, and will occur to them if they are lucky enough to live a long time. My mother was in a very nice/elegant and expensive facility in Honolulu for the last 15 years of her life, and really needed it for over 10 years. I won't need one quite so elegant, but I do not want to have to rely on Medicaid, which may not even exist in 30 years, and I do not want to end up enduring the experience of a Medicaid nursing home.

I think that possible future needs and costs of such a facility is something many of us may find worthwhile to consider when doing financial planning for ER. Those who feel comfortable relying on insurance companies for this can get long term care insurance. An alternative is to self-insure. We can see in Firecalc that a slightly lower SWR over many years can result in a nestegg that is substantially larger and could be used for such expenses. Time is on our side.

Whew - - good morning! Time for another cup of coffee. Hope the above makes sense to the reader.

 

[W2R]

The wave of early Boomers may indeed have it better than those in later waves. Post WWII Boomers should have a better pension than those in later periods and will also have 401k or similar programs to fall back on for even more money. Paid or partially paid group health insurance should be fairly common with the early Boomers.

That may be true. There is a huge difference between the situation of those around my brothers' ages (born in 1942 and early 1944), and those of boomers my age (born in 1948 ). One thing is the expectancy and realization of full pensions and health care if one has worked many years for a company. Some of those my age will get these benefits, and some won't. Some, like me, will get a hybrid setup consisting of a pension too small to live on, supplemented with a 401K plan.

I am the youngest retiree in my family. My older brother plans on working until he is 62 or so. My dad worked to manditory retirement at 65 and my mom took an "early" retirement at 63.

My mother and father worked part time from 55-70, and my two brothers retired for good before they were 53. So, I think that when I retire at age 61 I will be retiring at the oldest age of anyone in my nuclear family. I feel like it too, most mornings! Less than 2 years to go, though.

 

[Alan]

Does that mean that the government needs to allocate large funding for each pension recipient? It seems ironic that the current focus is on its possible inability to fund social security or medicad or medicare program in the future but not the pension programs funded by local, state or federal government. I will be mad if they cut (or terminate) social security or medical care benefits but continue to pay pension benefits (that are much more generous than those of SS).

Absolutely. It is already a very contentious issue in Britain where governement pensions are generous and COLA'ed and the government is the largest employer etc.

In France there have recently been many strikes and demonstrations 'cos the new president is trying to increase the retirement age for government workers for the same reasons that government paid pensions are such a huge problem.

 

[FinanceDude]

Does that mean that the government needs to allocate large funding for each pension recipient? It seems ironic that the current focus is on its possible inability to fund social security or medicad or medicare program in the future but not the pension programs funded by local, state or federal government. I will be mad if they cut (or terminate) social security or medical care benefits but continue to pay pension benefits (that are much more generous than those of SS).

Good post, right on........

 

[mickeyd]

I had never given any thought to the issue of Early Boomers, Mid Boomers, Late Boomers, but it is a good topic to ponder.

I am actually part of a fourth level. I am a pre-boomer (by a couple of years). I have a couple of pensions, untapped SS, and I have had a longer time to accunulate my tax-deferred investments. We all understand how powerful the final few years of saving/investing are if we understand John Bogle's "relentless rules of humble arithmetic."

We pre-boomers seem to have a small step up on non-pre-boomers.

 

[haha]

We pre-boomers seem to have a small step up on non-pre-boomers.

The biggest step up was a lifetime of front-running.

Ha

 

[Walt34]

This article refers to "affluent boomers", but with an average net worth of a bit over $250k, that seems a bit low to be referred to as affluent.

I suppose it depends on one's definition of "affluent". Some people define that as having enough to eat. A "letter to the editor" in the newspaper about higher taxes a few years ago grabbed my attention - the writer was complaining that it was hard to get by on her $600/month SS check. I'm sure it is! From that lady's perspective my wife and I are very wealthy.

My first thought was "How could anyone survive on that"? My wife and I spend about that at the grocery store including non-food items. Yet from the numbers I've seen others post on this forum, they would consider themselves severely constrained on our income. But the truth is, we are living in a home that is a lot nicer than we ever dreamed we'd have 30 years ago, we own two vehicles, can come and go as we please, and don't feel the least bit deprived.

So it's all relative. Or something.

 

[old woman]

I am a 1948 boomer and have no pension or paid medical to count on in retirement. Unless you worked at one company for decades or were union or government people just don't get pensions. My boyfriend worked at Bethlehem Steel for years but it was bought out by Seattle Steel and his pension went to the guarantee trust. He worked at the port of Seattle and was on his way to a pension when they cut out the warehouses, he had 5 years in so will get something, now he works for the Port of Tacoma and at 60 has 2 years in and needs 5 to get a small pension. The pensions you get after 5 years on a job will be tiny but a few hundred from 3 pensions will help . Lucky for him he lives with me so will live in a nice house with food if he has money or not. He does have to give me some money but it is really not that common to have pensions.
People like him wouldn't save on their own, he tried but being unemployed 3 year in his mid 50s trying to land the Port of Tacoma job he took his money out of his old 457. He does have a 457 now and is putting some money in but doesn't know what it is they just take a couple of dollars an hour an invest it in something but he doesn't know what, they recommended something.

 

[rs0460a]

I suppose it depends on one's definition of "affluent". Some people define that as having enough to eat. A "letter to the editor" in the newspaper about higher taxes a few years ago grabbed my attention - the writer was complaining that it was hard to get by on her $600/month SS check. I'm sure it is! From that lady's perspective my wife and I are very wealthy.

My first thought was "How could anyone survive on that"? My wife and I spend about that at the grocery store including non-food items. Yet from the numbers I've seen others post on this forum, they would consider themselves severely constrained on our income. But the truth is, we are living in a home that is a lot nicer than we ever dreamed we'd have 30 years ago, we own two vehicles, can come and go as we please, and don't feel the least bit deprived.

So it's all relative. Or something.

"She calls out to the man on the street
He can see she's been crying
She's got blisters on the soles of her feet
Can't walk but she's trying"

- Lyrics from "Another Day in Paradise" (by Phil Collins)...

Yes, many of us are "blessed" (we just don't realize it)..

- Ron

 

[Bikerdude]

This statistic seems more or less consistent with what I've read elsewhere. The thing that perplexes me is the total disconnect between the net worth of the average "affluent" 59-year-old and the $1-4 million that most estimate will be needed for a safe and comfortable retirement. Just how does a net worth of $250K hold up when subjected to the 4 percent withdrawal rule? That's a freaking $10,000 a year! I just don't understand how this is all supposed to work out.

I read an article about a Fire Chief in a town in CA that retired at 50 with a $125,000 yr. cola pension and free heath care .

Do the numbers on that one and see what its worth .

And that's just one public employee .

 

[Independent]

This article refers to "affluent boomers", but with an average net worth of a bit over $250k, that seems a bit low to be referred to as affluent.


Affluent Boomers Feel Young

Thanks for the link. The full article, at http://www.metlife.com/WPSAssets/15708378001198694051V1FBoomersReadytoLaunchHighlights.pdf

has some more interesting stuff. Like most surveys MetLife does, it's really aimed at marketing information, but I expect it's about as accurate as any decent survey.

I think the averages they found show that people are doing "okay" financially, depending on medical expenses. That's better than the doom and gloom I've seen in some other sources.

Based on this survey, at age 62, they've got a paid-up house worth $300k, plus $250k in assets, plus a defined benefit pension plan. In additions, the couple probably has a "full" SS benefit around $28k, which would be $21k if they take it at 62.

They had 2 or 3 kids, who are now out of the house. So they haven't been spending their whole income on just the two of them. i.e. with only two people today, they know how to live without spending their whole $71k annual income.

They could probably retire today, do a 4% SWR of $10k a year, take reduced SS and reduced pension, and "get by" (it helps if they can stay on the employer's health plan for the next 3 years).

But they are planning to work longer. If they end up retiring around 65, they'll have more assets, more SS, a bigger pension, and medicare. They will be able to maintain their current lifestyle.

They are at risk regarding medical insurance. So long as they stay on the employer's plan, they are okay. However, if their employer(s) goes out of business tomorrow, cuts their job(s), and they lose their medical insurance, they take a real finanacial hit. (It's easy to see why medical insurance is a big political issue.)