Thursday, February 28, 2008
I had a moment of clarity on the stairmaster yesterday that while I am far from early on this thought, it is grim for society nonetheless.
Based on various things I read and anecdotal observations I am convinced that baby boomers (I am using this term for economy of space, not for rigid age parameters) is going to spend beyond their means, looting their nest eggs and one way or another to end up living for years way below the lifestyle they tried to save for.
This will cause various strains on the system that I cannot quantify.
I have read about this before obviously but for whatever reason it just now struck a chord with me. Plenty of folks have offered explanations as to why this might happen but I am not sure it is something that needs to be explained.
Most people know they need to watch what they spend, they know the market can go down every now and then, can grasp how the numbers work but just as that is true many people end up living $100,000, or more, lifestyles when they can only live $80,000. The $20,000 doesn't sound like much of a difference but two or three years like that combined with a 10% drop in the market and the odds for failure now go way up.
How many boomers do you think have retired since 2003 (rhetorical question, I have no idea)? Anyone who has spent too much in the last couple of years is now probably relying on the market to bail them out over the rest of the year. Maybe it will or maybe it won't but clearly they have no hand in the outcome--unless they go back to work right now and don't take anything out of their account for the next 24 months.
I have written about this sort of thing before but it has been a while. I agree that the way in which people retire will by necessity (for most folks) have to evolve, it probably has been evolving actually. To me the easiest idea is to seek out multiple streams of income (there is a book out there by that title). That can include your portfolio, social security (even if the benefits get discounted) and some sort of job (part time or otherwise).
The ideas here are limitless. I have a neighbor who is 76 (I mentioned he was 77 in an earlier post, sorry Phil) and can have all the work he wants with his backhoe at $60 per hour. Another neighbor owns a small snowcat and plows everyone out (we pay him $20 for about 3 minutes work). Both of these are tonka toys to these guys; they have figured out how to monetize playing on their toys.
There are ways to monetize certain hobbies. Chances are if you have a hobby you love that you've been doing for 20 years it wouldn't be that difficult for you to assess whether it can be monetized and then proceed.
I realize not everyone can work until they are 70 and there are potential obstacles that go with getting older but the bigger picture to what I am describing is the need to be resourceful within your circumstances, to live within your means and figure out how you can take some stress off your nest egg (I just had an image of Albert Brooks from the nest egg scene in Lost In America).
I think the impact on society could be very serious, the action you take will determine whether this involves you or occurs around you.