We (boomers) are screwed
From GK writing at
The Futurist:
Why Baby Boomers Will Have a Troubled Retirement
Amongst people under the age of 35 in America, a predominant view that I see emerging is how the Baby Boom generation in the US (born 1946-64) is consuming the future of the younger generation in an attempt to finance an opulent retirement. While this may indeed be the political goal of at least some Boomers and the core mission of many retiree organizations, the fiscal situation in the US is far worse for the Boomers than they realize, no matter how much they attempt to extract from younger people.
Boomers and Entitlements: While the first Baby Boomer turned 65 in 2011, the median Boomer (born in 1955) turns 65 in 2020, and the last ones turn 65 in 2029, which indicates that their big harvesting of Social Security and Medicare from the government has not even begun yet. Given rising life expectancies, the peak years of Boomer harvesting will be 2015-2035 or so, which means that a huge level of withdrawals are anticipated for this 20-year window.
But alas, someone got to the goodies first. This chart from Carpe Diem shows how US Federal Debt went from 65% of GDP in 2008 to almost 100% today. That 35-point rise was supposed to be consumed by Boomers seeking to finance their retirement, but now, with debt already so high well before Boomers can get their, the future payouts to Boomers have been crowded out. There is certainly no room for another 35-point rise in Federal Debt as a percentage of GDP (credit downgrades and a capital exodus would happen long before debt could ever reach 135% of GDP), and given that the big debt spike began in 2009, it appears that President Obama and the Democrat Senate have already expended the funds that were supposed to sustain the Boomers.
As debt thresholds that were not meant to be reached until many Boomers were well into their retirement have been pierced ahead of schedule, the squeeze will cause some very ugly intra-Boomer conflicts as each group seeks to secure a portion of the diminished pie, which we will examine later in the article.
Boomers and Home Equity: But it gets worse for the Boomers, even for those who have resources that makes them less dependent on Social Security. The housing market has been in a slump (which I predicted at the very height of the boom in April 2006), and this will, at best, tread water for the next several years. Ultra-low mortgage rates have merely arrested a further decline, and even that deep well has been fully consumed (chart from Calculated Risk, click to enlarge).
While some Baby Boomers believe they still may have enough time to recoup substantial home equity with which they may seek to finance a portion of their retirement, in order to retain their equity, they need a steady flow of first-time buyers to enter the housing market,in numbers greater than the rate at which retiring Boomers want to sell.
Who are these new first-time buyers? Why, the endless supply of young people starting their careers and forming families, of course. But alas; the many members of this generation, born after 1990, will not be in any position to buy the houses that Boomers are seeking to sell.
To cultivate a new generation of home buyers who can take on a mortgage, it is imperative that they do not already have a mortgage-sized debt before that. But the higher education industry got to this generation before the mortgage industry could, and many members of this generation have already signed away the first several years of their earnings to servicing their student loans in a rapidly inflating bubble (chart from The Atlantic, click to enlarge), amounting to some $867 Billion in indebtedness that is yet to abate. It may be unfortunate that this upcoming generation was unavoidably destined to take on debt, and that it was only a question of whether the student loan industry or the mortgage industry yoked them in first. But it appears that student loans won the race to reach their prey, which is bad news for Boomers seeking to sell their homes in 2015-20.
Lots more at the site. Like I said, us boomers are screwed and the next couple generations aren't going to think kindly of us either.
The comments are excellent -- they "get it"...
Posted by DaveH at March 11, 2012 10:22 PM