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The Baby Boomer Generation is a source for trends, research, comment and discussion of and by people born from 1946 - 1964.

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July 15, 2003

Can Baby Boomers Afford to Retire?

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Can Baby Boomers Afford to Retire?
Tuesday, July 15, 2003

This article in the New York Times comes down hard on the savings habits of baby boomers. According to this, we may all end up living in our cars or, even worse, with our children.

Since the Times tends to archive articles quickly and make them retrievable for payment only, you can read it here as well.

A Soft Landing for the Boomers?

As baby boomers face retirement, they have a problem of their own making. This often-pampered and self-indulgent generation is unprepared financially. Instead of saving, too many of them have mortgaged their futures for a BMW lifestyle.

The latest figures from the Federal Reserve show that the median net worth -- or difference between assets and liabilities -- is $123,684 for families whose household heads are 45 to 54 years old. That means that half the families have more than this amount and half have less. The average net worth for the group is $419,073, but the median is probably more representative because income distribution in the United States is heavily skewed toward the top, a trend that has been accelerating in recent years.

These assets, especially the median figure, do not point to lavish retirements, and the clock is ticking. Boomers are turning 50 at the rate of seven every minute and will continue to do so until 2014, according to American Demographics magazine.

Of course, it's wrong to generalize excessively about this generation of 70 million or so people. Dr. Robert N. Butler, the president of the International Longevity Center-USA, a research organization in Manhattan, has observed that the quintessential upscale baby-boomer lifestyle often depicted in the media tends to be a coastal phenomenon; in the center of the country, boomers are almost indistinguishable from the rest of the population.

No one should generalize, either, about how much money people need to retire comfortably, despite the mutual fund industry's self-serving estimate that it will take at least 70 percent of your annual preretirement income.

Deena Katz, 53, an independent financial adviser and the president of Evensky, Brown & Katz, a financial planning firm in Coral Gables, Fla., has some definite opinions about her generation. She says the fundamental difference between baby boomers and their parents is in the philosophy of and approach to "things."

"The big issue for baby boomers is that they live in the immediate now," she said. "They have always given themselves everything they thought they were entitled to. When my folks needed a refrigerator, they saved money and bought it. Notice I said `needed,' not `wanted.' Now, when boomers want a refrigerator, they buy it and pay it off over time.

"So the boomers are absolutely going to have a hard time making an adjustment to a downsized lifestyle, because they haven't saved enough to continue as they have been living."

But many will have to make that adjustment, and she expects the boomers to solve the problem in a way typical of their generation: they will change the rules.

"I don't think the boomers will be a generation of traditional retirees," Ms. Katz said. "We will be a generation of repositioning."

"Repositioning" is another way of saying that the boomers will continue to work in some fashion and will stay very active in their version of "retirement" as has been indicated in most surveys.

UT what about the generation's resistance to giving up "things" and living a less expensive life?

"They are going to have to make some sacrifices and changes," Ms. Katz said. "And that will work for them if they are convinced these changes are positive rather than negative."

She also says that many baby boomers and others who maintain that they don't want to move to a less expensive part of the country when they retire will actually do so when the time comes. A recent survey by Harris Interactive for Del Webb, the big builder of retirement communities, may support that notion. In the April survey, 59 percent of baby boomers aged 44 to 56 said they would relocate in retirement; in a similar survey in 1999, only 31 percent of those from 48 to 52 said they would do so.

"We'll see a great exodus from the cities into a simpler, less complicated lifestyle," she said. "But it will be a positive thing for the boomers -- not, `You're going to have to sacrifice and downsize!' but, `I want to make my life simpler and the plus in that is that it's going to cost me less.' This will be their salvation from the problem of not having saved enough. When the mutual fund industry says you can't retire on less than 70 percent of your preretirement income, the boomers will say, `Not me, baby; I'm going to figure it out.' "

The differences in housing prices around the country show why boomers might be willing to move.

Whenever I check home prices on the Internet, in newspapers or in real estate booklets, I am astounded by the low prices outside major metropolitan areas, particularly when I look away from the East or West Coasts. That $300,000 you might pay for a small house in the New York or San Francisco areas will buy much more in Arkansas or New Mexico.

Last winter, I took a car trip through the eastern part of West Virginia, then south through the Blue Ridge Mountains of Virginia. I picked up several real estate booklets along the way. While plenty of homes were listed in the $200,000-to-$300,000 range, there were also these:

A new home on a one-acre wooded lot. It had three bedrooms, two baths, vaulted ceilings, a fully equipped kitchen, a fireplace, a basement and a deck with a hot tub. The asking price was $149,900.

A two-story log home on five acres. Three bedrooms and two baths. $95,000.

A ranch house on 1.77 acres. Three bedrooms, two baths, a fireplace, deck and a double garage. $119,000.

Of course, these houses have probably been sold by now, and comparable houses may have risen a bit in price. They may not match your personal tastes or be in areas where you want to live, but you get the idea.

a good web site for home prices nationwide. To compare costs of living, including home prices, among most cities and towns, try It's an eye-opener for coastal boomers.

Posted on July 15, 2003 12:17 PM

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my question is what and why was the Baby Boom thought up and what did it stand for.

Thank you

Posted by: Darnisha Townsend on July 17, 2003 9:52 PM

The mass majority of boomers will retire as their companies are forcing the issue. The real question to ask is 'will they be able to live the same lifestyle in retirement as they did pre-retirement?" Soberly, the answer is no. Baby boomers live a luxurious life currently. If the do not increase their personal savings they will not be able to live the same lifestyle. With that in mind, I created a website livinginstyleonline to assist baby boomers live the luxurious lifestyle today at a discount allowing them to be able to save more money.

Posted by: Ida Byrd-hill on March 30, 2005 7:13 PM

Most Baby Boomers don't have a clue. The latest figures I have seen from various sources report the following:
A couple needs about $200,000 to fund their out of pocket health care needs for a 20 year retirement. This is for Medicare supplement premiums, co-pays, and drugs. To achieve a retirement income of $60,000 year, a nice, middle class Baby Boomer figure, assuming $1200mo from Soc Sec and $1800mo from pension, would still require investments of about $700,000 in order to generate the missing $2000mo. If you realize that the average 60 yr old has less than $100,000 in his 401(K) or IRA, that is far fetched. The Cup O'Grits, as it were, is that the cost of living will double over a 20 year retirement!

Posted by: BIll Young on September 15, 2007 7:30 PM

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