Three Reasons Why Boomers Won't Retire on Time - And Why It's a Problem for the Rest of Us
Boomers won't be retiring on time - for many not any time soon. While many of us don't really feel sorry for them, since many of them seem to have enjoyed lifestyles fueled by excessive mortgage, credit card and other forms of debt, this doesn't bode well for the rest of us. Why it's a problem for the rest of us has to do with the way things are supposed to work.
The way things are supposed to work is that people retire from the labor force after a certain age. Then their job is done by someone younger, someone not yet retired. Think about it: if they don't retire, there won't be a job for someone younger. It clogs up the natural flow of things.
Indeed the latest payroll data provides evidence that this is happening. That data tells us that total non-farm payrolls grew by 2.32 million (2.03 million if you use the "Household Survey" figures). But it also says that employment of those 55 or older (Boomers) grew by 3.04 million. Do the math. This means that employment of those under age 55 dropped almost a million. See the connection?
Still not sure. Well, it turns out that most of those 3.04 million jobs Boomers took are lower-paying jobs - just the sort of jobs younger people take. Does that make the connection clearer?
Boomers won't - or in many cases can't - retire. And that leaves fewer jobs for younger people.
Now why can't they retire? We could say it's because they didn't save enough. And that's certainly the case for many. Savings rates declined during the years that Boomers entered their highest-earning years. They should have increased. But many Boomers, apparently, just spent those higher earnings.
Of course, some, who had children, may have had to spend money on college tuition. That could account for some of the lack of savings. But there's even more to this.
Lo and behold, we find the Fed behind the curtain here. How? Well, Fed policies enabled - some say caused - bubbles in the stock market and in real estate. Then those bubbles burst. With stocks, the bubble burst first in 2000 - 2002, then again in 2008. Many Boomers were watching their 401k balances go up and didn't feel they had to save as much. They were planning on retiring based on those great stock gains - until they lost money when the bubble burst.
And, of course, many Boomers owned homes whose value steadily increased over time - and then really shot up from the late 1900s through the early 2000s - until the real estate bubble burst too. And all along, Boomers were counting on some of that home equity to fund their retirements. How many of those Boomers didn't save as much because of that increased home equity? Indeed, many took out home equity loans and spend some of that home equity money.
How did Fed policies distort the Boomers perceptions of how rich they were (or weren't) and/or enable their spendthrift behavior? They kept interest rates low for extended periods, specifically to "goose" the stock market and the real estate markets. So the Boomers thought they were rich when they weren't, they spent money that - as it turned out - was based on bubble markets that went poof. They thought they'd still have enough left over for retirement. Now it's all gone.
Oh, and let's not forget that the Fed has kept interest rates low - practically at zero - for years now, and is continuing to do so. Ironically, that means that Boomers can't get any return on their money to live off of if they do decide to retire.
It is, as the expression goes, a real dilemma.
We're not letting the Boomers off the hook here. Many of them were simply irresponsible and spent their retirement money and took on too much debt. So don't feel sorry for them.
But what about the Boomers who did save? They're out there. They can't use their savings to generate interest to fund their retirements. You don't have to feel sorry for them, but you shouldn't blame them for being irresponsible by spending all their dough and running up their credit cards and taking on too much mortgage debt.
The thing is, either way, it's having a real negative impact on all the younger, non-Boomers out there. They're not finding jobs.
If you don't understand how the Fed has caused some or a great part of this, it's time you did some homework and some thinking and figured it out. I hope this gives you a start.
The way things are supposed to work is that people retire from the labor force after a certain age. Then their job is done by someone younger, someone not yet retired. Think about it: if they don't retire, there won't be a job for someone younger. It clogs up the natural flow of things.
Indeed the latest payroll data provides evidence that this is happening. That data tells us that total non-farm payrolls grew by 2.32 million (2.03 million if you use the "Household Survey" figures). But it also says that employment of those 55 or older (Boomers) grew by 3.04 million. Do the math. This means that employment of those under age 55 dropped almost a million. See the connection?
Still not sure. Well, it turns out that most of those 3.04 million jobs Boomers took are lower-paying jobs - just the sort of jobs younger people take. Does that make the connection clearer?
Boomers won't - or in many cases can't - retire. And that leaves fewer jobs for younger people.
Now why can't they retire? We could say it's because they didn't save enough. And that's certainly the case for many. Savings rates declined during the years that Boomers entered their highest-earning years. They should have increased. But many Boomers, apparently, just spent those higher earnings.
Of course, some, who had children, may have had to spend money on college tuition. That could account for some of the lack of savings. But there's even more to this.
Lo and behold, we find the Fed behind the curtain here. How? Well, Fed policies enabled - some say caused - bubbles in the stock market and in real estate. Then those bubbles burst. With stocks, the bubble burst first in 2000 - 2002, then again in 2008. Many Boomers were watching their 401k balances go up and didn't feel they had to save as much. They were planning on retiring based on those great stock gains - until they lost money when the bubble burst.
And, of course, many Boomers owned homes whose value steadily increased over time - and then really shot up from the late 1900s through the early 2000s - until the real estate bubble burst too. And all along, Boomers were counting on some of that home equity to fund their retirements. How many of those Boomers didn't save as much because of that increased home equity? Indeed, many took out home equity loans and spend some of that home equity money.
How did Fed policies distort the Boomers perceptions of how rich they were (or weren't) and/or enable their spendthrift behavior? They kept interest rates low for extended periods, specifically to "goose" the stock market and the real estate markets. So the Boomers thought they were rich when they weren't, they spent money that - as it turned out - was based on bubble markets that went poof. They thought they'd still have enough left over for retirement. Now it's all gone.
Oh, and let's not forget that the Fed has kept interest rates low - practically at zero - for years now, and is continuing to do so. Ironically, that means that Boomers can't get any return on their money to live off of if they do decide to retire.
It is, as the expression goes, a real dilemma.
We're not letting the Boomers off the hook here. Many of them were simply irresponsible and spent their retirement money and took on too much debt. So don't feel sorry for them.
But what about the Boomers who did save? They're out there. They can't use their savings to generate interest to fund their retirements. You don't have to feel sorry for them, but you shouldn't blame them for being irresponsible by spending all their dough and running up their credit cards and taking on too much mortgage debt.
The thing is, either way, it's having a real negative impact on all the younger, non-Boomers out there. They're not finding jobs.
If you don't understand how the Fed has caused some or a great part of this, it's time you did some homework and some thinking and figured it out. I hope this gives you a start.
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