Good news, Boomers: You only have to work a little longer
We Baby Boomers have all heard this refrain, and perhaps uttered it ourselves: If the stock market doesn’t recover, I may never be able to retire.
A new National Bureau of Economic Research working paper, however, finds that fear to be vastly exaggerated. Three co-authors — two from Dartmouth and one from Texas Tech — look at portfolio data for 51- to 56-year-olds and estimate that just 15 percent of their total wealth was in stocks. If that sounds low, consider that total wealth is a pretty broad term, including home equity and the present value of future Social Security benefits. Pensions and Social Security, in fact, account for roughly half of those Boomers’ total wealth. Here’s where the authors put stock-market losses in perspective:
Thus, a substantial and permanent decline in the stock market from its 2006 level means an average fall of several percentage points in average wealth. This loss is a significant one: percentage points of personal wealth should never be taken lightly. But it is not a life-changing loss for the average household.
So, how much longer will the typical Baby Boomer have to work because of the recent bear market? Only about a month and a half, the authors say.
The paper also considers falling housing prices but says they shouldn’t affect most people’s retirement decisions. Of course, the authors admit, your experience may differ:
From the lofty standpoint of aggregate labor market statistics, these effects do not appear large. But retirement is a major lifetime decision, one that workers often consider and lead up to for some years. Suddenly feeling a need to reconsider a retirement decision and then postponing retirement for a year or more would certainly feel like a substantial misfortune to many retirees.
The paper touches lightly on another effect of the recession: Many laid-off workers are being forced to retire earlier than they had planned. In a separate NBER working paper, two Wellesley College economists say that phenomenon is the truly large one:
On net, we predict that the increase in retirement brought about the recent rise in unemployment will be almost 50 percent larger than the decrease in retirement brought about by the stock market crash.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
With my military retirement and Social security I’m aiming to retire at 62. I’m 55 now and while I do have some stocks and mutual funds and 401K I never planned on trying to live off of those.
Ya know I was looking at the rate of return on my investments for the past 5 years in my 401K. I have my money spread out over 10 accounts (from conservative to aggressive) and here is the rate of return for the past five years up to 09/30/2009 on those accounts, 2.4, 3.2, 4.6, 1.5, 1.7, 5.6, 3.6, 2.8, -1.6, 2.9. So that comes to about a 2.673% return, so would I have been better off taking that money and simply investing in bank insured cds? The return on the cds if I shopped around would probably have been at least that over a 5 year period. I wouldn’t have lost any principle and wouldnt have to worry about. Just a thought.
Most non boomers really aren’t overly concerned about the most self absorbed, narcissistic, irresponsible generation that this nation ever produced. During the boomers time, the nation has gone fron the worlds greatest creditor nation to the worlds greatest debtor nation. During the boomers, America’s manufacturing and industrial base has been gutted. During the boomers time, the nations future has been mortgaged to the Chinese and Japanese. And now the boomers are going to start sucking up entiltlement benefits which will also be financed by the Chinese. I say warehouse the boomers in pre-fabricated metal buildings with a cot and three sqaures a day. The boomers must be told that for the first time in their lives, it’s time to shut the $%^# up.
Let’s not forget that under the boomers the nation faces the greatest economic collapse since the Great Depression. Their Wall Street easy money schemes, led by non capitalized credit default swaps, went down like dominos requiring a Federal Reserve and Federal Treasury bail out to prevent a total economic collapse. Face it, you are in your 50’s and 60’s now. The party is finally over.
Hey… some good news for Boomers… what should we do with our extra free time? Some thoughts on 10000boomer.com
Dave
Mr. Mills, I’ve have an idea on what the boomers could be doing with their spare time. You could start by apologizing to your children’s and grand children’s generation.
The “good news” reported here is only good if one ignores the underlying bad news, which is that most people approaching retirement do not have enough savings/investments outside of their house equity and Social Security benefits to maintain their accustomed standard of living in retirement. A recent article on retirement finance in the Wall Street Journal pointed out that Social Security benefits generally only amount to about 1/3 of a person’s average annual earnings. The same article said that most people in retirement need to spend about 80% of their pre-retirement level to maintain their lifestyle. I would say that most could live about as comfortably on about 2/3 of their pre-retirement spending level, but that is still a lot more than their Social Security benefits will pay.
The bottom line is that a lot of people had best be planning on working until they are 70 or so. Hopefully, they can find ways to do this in which they utilize and are paid for the skills that they have acquired, but are able to gradually cut back on the number of hours that they work per week.
The last thing that people older than 55 or so should do is to put all of their savings into stocks or other high risk investments in the hope of having their assets multiply in value before they retire.
The lifespan has increased by 30 years in the past century. Stats say many boomers are not financially prepared for those “bonus” years. Healthy boomers will continue to work as long as possible if they don’t want to end up existing at a poverty level when they are most vulnerable. Traditional retirement is an anachronism. It’s time to face up to reality.