Young Boomers Going Broke!?

[tryan]

Really nothing new here - no specifics - just singling out young boomers. Being a young boomer, I don't feel the doom n'gloom described. But good news doesn't sell today.

The youngest boomers were having the most problems paying their mortgages or rents. They were also more apt to pull money out of their 401(k) accounts and other investments and change their lifestyles. About 76%, for example, said they are eating out less, and 71% said they are spending less on entertainment.

Will youngest boomers go broke? - MSN Money

 

[Helena]

There are three major things that affect personal net worth
that are within one's control:

Income - Spending vrs Saving - Debt.

I would assume young boomers, like most Americans,
get into trouble by mismanaging the last two.

Recently, on the Dave Ramsey program a doctor's wife
called in crying about how they had massive debt and
no money. Household income was $200,000 a year.

Income doesn't see to be the issue as much as spending
beyond one's means and accumulation of massive debt.

As the old saying goes.... no matter how much one's
income increases, one's outgo rises up to meet and
exceed it.


~

 

[Nords]

[rant]
I have mixed reactions to this genre of deadline journalism.

First, these articles seem to be published at least weekly during up markets and hourly during recessions. There's always someone willing to provide a gloomy story or a scary sound bite, but rarely any context other than anecdotal or made-for-journalism non-peer-reviewed surveys. Bonus points for quantifiers like "horrific". It's like the first couple reels of "The Perils of Pauline" where she's tied to the train tracks, a steam whistle is heard offscreen and then... tune in next week!

Second, where's the statistical rigor and insightful analysis? Would your high-school statistics teacher take this for your semester project?:

This study is based on a national telephone survey of 1,002 adults ages 45 and older who were currently working, looking for work, or retired. This sample was then boosted to obtain additional interviews with Hispanics, producing an oversample of 400 Hispanics ages 45 and older. The interviews were conducted in English by Woelfel Research, Inc. from April 12 to April 23, 2008.

I guess if you're "happily unemployed but not retired" or "Se habla espanol?" your input wasn't deemed necessary. And was the article going to talk about the significance of the Hispanic oversampling, or does it just make the stories better?

Third, is some taxpayer or charity or enforcement authority expected to save these people from their blissful ignorance? Were they forced by unethical financial advisors or greedy 401(k) custodians to raid their retirement funds? Or did they just overspend on their discretionary expenses, and as a result:

About 76%, for example, said they are eating out less, and 71% said they are spending less on entertainment.

Doesn't sound like anyone's homeless or selling blood products for food. As for going without medications or health insurance... refer back to that phrase "blissful ignorance".

Fourth, what's the final reel of this horrific scenario? Famine? Pestilence? Riots in the streets? Mass suicides or euthanasia? No, they're going to keep working. Eeek. That's right, the people who spent all their money are going to salvage their flattened retirement accounts by... (wait for it)... working longer. Holy crap, Batman, quelle horreure.

I wonder if they'll keep donating their payroll deductions to Social Security and Medicare.
[/rant]

Disclosure: Instead of reacting to articles like these, spouse and I give a significant portion of our SWRs to the Hawaii Food Bank and the Institute for Human Services-- real charities helping real people with real problems... and who probably don't have enough of a work history to be able to depend on SS or Medicaid, either.

 

[Darryl]

Nords, beautifully dissected I am in tears again this place is a wonderland of comedic relief.

 

[Jay_Gatsby]

There are three major things that affect personal net worth
that are within one's control:

Income - Spending vrs Saving - Debt.

I would assume young boomers, like most Americans,
get into trouble by mismanaging the last two.

Recently, on the Dave Ramsey program a doctor's wife
called in crying about how they had massive debt and
no money. Household income was $200,000 a year.

Income doesn't see to be the issue as much as spending
beyond one's means and accumulation of massive debt.

As the old saying goes.... no matter how much one's
income increases, one's [-]outgo[/-] ego rises up to meet and
exceed it.


~

Fixed that for you.

 

[Bestwifeever]

Parents at the age of the younger boomers (45 to 55) have always had the temporary financial pain and emotional pleasure (okay, emotional pain too) of children in their teens. Of course people the age of the younger boomers are broke. Been there, done that. But it goes away when the children are out on their own (which would correspond to today's later boomer ages). So IMHO it's partly a temporary situation.

 

[Texas Proud]

Nords, beautifully dissected I am in tears again this place is a wonderland of comedic relief.

I agree.... and I keep wondering why people are leaving I must have a thicker skin than others....

 

[ziggy29]

Yep. I am tired of all the rocks news people are looking under to find pain.

You could find horror stories of relatively high-income people going broke because of too much consumption and debt any time. But when the perception is that the economy is strong, no one writes these articles. As soon as the media has beaten the drums of recession enough to make it a self-fulfilling prophecy, they pull out these types of articles to scare them even more and make it worse.

You'd think they were all short on the economy the way they "sell" doom and gloom stories for more revenue.

Greed and fear sell. And usually an excess of greed leads to an economic hangover that turns it to fear, and these media types lead the charge in both ways -- not just reporting on it, but influencing it. I wouldn't be surprised if some newspapers start including a foil hat insert in the Sunday edition.

 

[citrine]

I love this board! What a bunch of straight shooters.....what an absolute relief from the contrived politeness/indifference of society!
These articles make me mad too....you don't need to have a degree to know that you can only spend what you make....if you borrow money, you will need to pay it back, and that one day you will get old and will need money to live off of!!!
It's not rocket science!
I don't even bother listening to the news or reading these silly articles anymore.....makes my blood pressure rise!
I'm becoming a grumpy old woman!

 

[Texas Proud]

To me it is funny when the TV people go out to show how 'bad' things are and they get this guy who maxed out credit cards... took out a home loan to pay them off, maxed them out again and now is having trouble paying them.... they asked him 'how much credit card debt do you have?' his answer '$79,000'.... WHAT??

Nobody asks 'what did you spend all that money on?'.... or 'how stupid can you be?'.... you know, the real questions that should be asked...

But no, it is the horrible greedy CC companies that came out and FORCED the guy to spend all that money because of their teaser rates...

as John Stossel would say... 'give me a break'....

 

[ziggy29]

But no, it is the horrible greedy CC companies that came out and FORCED the guy to spend all that money because of their teaser rates...

If you swim with the sharks long enough, you're bound to get eaten eventually.

 

[tuixiu]

OMG what a great post Nords.

 

[aida2003]

To me it is funny when the TV people go out to show how 'bad' things are and they get this guy who maxed out credit cards... took out a home loan to pay them off, maxed them out again and now is having trouble paying them.... they asked him 'how much credit card debt do you have?' his answer '$79,000'.... WHAT??

Nobody asks 'what did you spend all that money on?'.... or 'how stupid can you be?'.... you know, the real questions that should be asked...

But no, it is the horrible greedy CC companies that came out and FORCED the guy to spend all that money because of their teaser rates...

as John Stossel would say... 'give me a break'....

This is exactly what I think. Consumers presume they shouldn't be accountable for the money of CC compnies they spend. And it even doesn't belong to them in the first place. I think most of them haven't grown out of their childhood X'mas days when they got $$ as presents.

 

[jclarksnakes]

If you're gonna be stupid you gotta be tough.

 

[CitricAcid]

These stories don't make me angry, they amuse me at the incredible financial intelligence of the masses of America regarding credit, debt and speding too much damn money.

 

[ziggy29]

These stories don't make me angry, they amuse me at the incredible financial intelligence of the masses of America regarding credit, debt and speding too much damn money.

Why should they make me angry? The more they fritter away their money, the more they spend and go into debt, the longer they have to work and the longer they have to pay Social Security taxes. If they keep it up, it might actually be there for me in a couple decades...

 

[Walt34]

Nobody asks 'what did you spend all that money on?'.... or 'how stupid can you be?'.... you know, the real questions that should be asked...

But no, it is the horrible greedy CC companies that came out and FORCED the guy to spend all that money because of their teaser rates...

as John Stossel would say... 'give me a break'....

Indeed - DW and I know a couple just like that, I've written about them here before. They've repeatedly run up the CCs on "stuff" and trips and are now $500k or so in the hole after sucking all the equity they could out of their house. He's a carpenter and she's a retired math teacher - one would think she'd know better.

Listening to them, DW and I just look at them in slack-jawed astonishment.

 

[d]

i keep pretty close to home, but seems most everyone i know couldn't hold a nickel for more than a month ... by which time a new "need" would arise.

 

[headingout]

The more they fritter away their money, the more they spend and go into debt, the longer they have to work and the longer they have to pay Social Security taxes.

That's what I hope, on good days. On bad days, I have the disturbing feeling that a lot of my fellow Americans are bent on dying in debt and leaving the rest of us holding the bag. Personal responsibility seems in short supply.

 

[mountaintosea]

I didn't read the article. I can tell by everyone's response that it's the same old tune. All I have to do is look at some of the members of my own family and other people I know. All too common a story. In fact I was talking to someone I hadn't seen in a long time today and she said "still being frugal"? I forgot that it isn't normal to watch how one spends money. By the way she's upside down in her house that she's had for 10 years. She must have taken out one of them helocs? You think?

 

[Marquette]

So, I'm getting my hair cut yesterday at a new place. The person cutting my hair was probably 21-22. She has a CC but says the longest she carries a balance is 2 weeks because a CC isn't free money and you shouldn't buy stuff if you can't afford it.

She probably wont be interviewed anytime soon.

 

[Rustic23]

I remember a lecture in Stat class about conclusion from data. DW and I are spending less on entertainment and less on eating out. It is not because we have less to spend, but because we have more time to fix meals, we are more remote than before we retired. Yet, our answer to their question would lead them to their pre-conceived conclusion that we are in some dire financial trouble.

 

[ziggy29]

I remember a lecture in Stat class about conclusion from data. DW and I are spending less on entertainment and less on eating out. It is not because we have less to spend, but because we have more time to fix meals, we are more remote than before we retired. Yet, our answer to their question would lead them to their pre-conceived conclusion that we are in some dire financial trouble.

I believe that conclusion would be "correlation does not equal causation."

 

[growing_older]

With home prices dropping, there's a big excitement among my coworkers (most of whom are not boomers, but the following generation) that they will leave their apartments and buy a house. They are for the most part technical workers and well paid, but not execs or stock option millionaires. Many are plunging in to buy homes and taking on 500,000 or more in debt to do it. A couple of the more senior ones talk pretty freely about their plans to combine a jumbo first mortgage with either a HELOC or some other loan to get their downpayments under 10%. They seem to focus ONLY on monthly payments and don't seem to consider total debt amount at all.

This makes me think that whatever got the boomers in this story into living beyond their means and financial trouble is not a boomer phenomenon, but the same old human nature that leads a lot of folks into debt. It also make me think that even in the face of a huge real estate meltdown and widespread foreclosures, there are plenty of new takers (and lenders?) who won't get the message of LBYM except by personal experience of crashing themselves, if at all.

 

[haha]

So, I'm getting my hair cut yesterday at a new place. The person cutting my hair was probably 21-22. She has a CC but says the longest she carries a balance is 2 weeks because a CC isn't free money and you shouldn't buy stuff if you can't afford it.

She probably wont be interviewed anytime soon.

I've been getting my hair cut for 60+ years, and I can't remember any barber male or female discussing consumer finance. More like, "Do you want me to do your eyebrows?"

How did this discussion get started?

It also make me think that even in the face of a huge real estate meltdown and widespread foreclosures, there are plenty of new takers (and lenders?) who won't get the message of LBYM except by personal experience of crashing themselves, if at all.

If prices in your area have deflated, these people might be onto a good plan. There are a lot of people who got rich simply by living in a nice house in a nice neighborhood in a nice city on the West Coast. It takes a lot less thinking than other ways of getting rich. And it facilitates your social life in the bargain.

Ha