By Donna Evans-Deyermond
Let’s face it, the baby boomers have been nothing but trouble from the start. First they overflowed the education system, then available housing and now Social Security, Medicare and retirement plans.
Boomers are challenged by the loss of defined benefit pensions, and projections that the Social Security Trust Fund will run dry by 2033. When the surplus runs out, it’s predicted yearly tax revenues will cover only 75 percent of the benefits promised. And according to the Employee Benefit Research Institute, 44 percent of baby boomers now between ages 48 and 64 will run short of money during retirement.
No one – neither the American government nor the American worker – planned well for the retirement of this generation. Behavioral economists say we didn’t save enough or early enough. Most of us couldn’t envision what it will cost to live at age 65 or 70, and we didn’t foresee the pain of running short.
Some politicians, like Rep. Paul Ryan and former President George W. Bush, say Social Security should be privatized so individuals can invest for retirement as they see fit. But even boomers who planned well for their futures have not made it secure.
Over the boomers’ work lives (the past 45 to 50 years) there were four significant crashes in the stock market. In 1973-74, the Dow Jones Industrial Average dropped 45.1 percent. Then there was Black Monday in 1987, a 30 percent drop; in 2000-02, the burst of the tech bubble and 9/11 resulted in a 37.8 percent drop; and the housing crisis of 2007-08 saw markets go down 20 percent.
It’s true if you look at a graph of the market over the same 50 years it has always recovered, but for investors who didn’t have a lot of wealth, those hits seriously undermined retirement plans.
And today? While the Federal Reserve’s stimulus-related low interest rates are great for borrowers, they are punishing for savers, particularly those nearing retirement age who look to shift investments to safe, fixed-income vehicles such as bonds. Some annuity plans that promised good returns have changed the rules (did you read the fine print?) and reacted by suspending deposits until interest rates go up.
There are answers. A combination of increased contributions and cuts to benefits will save Social Security for future generations, according to Stephen Ohlemacher of the Associated Press.
If today’s boomers shift their retirement funds into savvy, safe investments, says Lewis Mandell, Ph.D., economist and financial literacy guru, and wait longer to take benefits, retirement will be more comfortable. Erring on the side of conservatism could be what allows us boomers to go out with a bang, not a whimper.
Donna Evans-Deyermond is a freelance writer and a baby boomer who, like many others of her generation, is just trying to figure it all out.