Time growing short to fix boomer retirement shock

Reuters ^ | May 31, 2004 | STELLA DAWAON

[sarcasm]

Aging baby boomers could trigger financial market shocks, deflation, slow growth and then an inflationary spurt, all very real risks that central bankers must consider in the next 20 to 30 years.

A research paper laid out these little-explored factors at an Austrian national central bank conference in Vienna on Thursday.

Japan, which is just emerging from a decade of stagnation, deflation and a banking crisis, serves as a wake-up call for the United States and Europe to get down to business and tackle their creaking public pension systems to lessen these risks.

"It could really blow up" if pay-as-you-go pension systems are not reformed, said E. Philip Davis, economics professor at Brunel University in London, who presented the paper. He said that central bankers still have time to assess the impact on monetary policy and their role as lender of last resort to manage the risks created by millions of baby boomers starting to retire in 2010.

But economists at the conference on growth and stability in the European Union said these issues have scarcely been examined from a monetary perspective.

Davis said the 1987 stock market crash, the 1994 bond market reversal, the Mexican peso crisis and even some elements of the 1997-98 Asian crisis are examples of the type of market price volatility that could occur as a huge wave of retirees reallocate their assets from high-growth stocks into safer bonds.

Even the technology-driven stock market bubble of the late 1990s can be partly attributed to a surge of baby boomers entering their peak saving years in their 40s and 50s, he said.

[Capitalism2003]

I really think most people underestimate when the 'next generation' will take political power. At the rate we've seen medicine advancing lately, the average 50-something male will very likely live 90-110 years, NOT 80 something that is commonly expected right now. The boomers will be in power MUCH longer than most people think...and this means social insecurity isn't going anywhere. I honestly envy you boomers...You will live through the peak years of socialism in America...collecting all of the benefits before the house of cards collapses. Your grandchildren will be the ones picking up the pieces, and being forced to live through the 2nd great depression. I hope you can do SOMETHING now to make life easier for them...save a small amount of tangible assets (gold/silver, etc) that can't be devalued through the coming devalutation (inflation) of paper money.

[wita]

Mucular? Muckular? That is what I get for not proof reading.
Of course the word is nookuler. To quote a well known gentleman from the great state of Texas.

[doosee]

You will live through the peak years of socialism in America...collecting all of the benefits before the house of cards collapses.

I think we are in the peak years right now. SS is slated to go broke by 2020 so the crisis will begin, politically speaking, in about 5 years. Comment to all on "The Greatest Generation". The generation who risked being hung by the King in 1776 to me is the TGG. England ruled the world and the armed resistance and victory by the ragtag Revolutionaries still amazes me.

[Jimmy Valentine]

This country will be subject to strong deflationary pressure as Boomers age and change their buying habits (fewer new cars, houses etc.) This will drop wages and prices over time.

Solution to Social Security is to move the retirement age to 68 for 1/2 benefits and 72 for full benefits.Same with Medicare.

Eliminate all supplemental Social Security and/illegals benefits.

To boost the economy, eliminate HUD, Commerce, Education, and Agriculture as Departments. Fully privatize Fannie Mae, Sallie Mae and Freddie Mac to encourage private market forces.

See? Problem solved!

Regards,

[Proud_texan]

As a member of the "greatest" I have to disagree. If you removed "boomers" and insert "greatest" in your list I think it applies even more.

Boomers didn't start the long walk to socialism and the nanny state, it has it's deepest roots in the 40s-60s and boomers weren't old enough to vote them. Social security to The Great Social were all greatest generation programs, boomers had nothing to do with them other than being raised by the greatest.

Every generation has it's own sack of rocks, boomers amoung them, but let's not muddy the waters of who started what, the rock got pushed down the hill a long time before boomers arrived, they just added a little mo to what their mommy and daddy started.

[risk]

Thanks for the comments. Simon Sebag Montefiore, who has written a biography of Stalin, claimed on Charlie Rose last night that FDR wanted a counter-balance to British imperialism and "loved" Stalin. We've all heard about communist infiltration into FDR's government. That would put the icing on the cake, wouldn't it?

[tm22721]

the answer is to keep working

Corporate America can't and won't allow it due to increasing health care and lower productivity of older workers.

Instead of less look for more on the government dole.

BUMP

[neutrino]

Corporate America can't and won't allow it due to increasing health care and lower productivity of older workers.

Well, actually...what they do is hire the older workers for 24 hours per week. The part time worker is, then, not eligible for benefits.

Look closely at the Wal-Mart greeters and you'll see what's coming.

[searchandrecovery]

"I will steal money from my children and grandchildren no longer; I will continue working and paying for my own costs."

You almost got it right - it's about stealing money from other people's kids and grandkids. Oh yeah, your children and grandchildren are working for me now. If you don't support the ponzi scheme, you are, frankly, Un-American (it was set up by all-American politicians, you know).

Hey legal & illegal immigrants - jokes on YOU! The school system sucks and you'll be taxed-to-death to pay for my retirement entitlements. Hahahahah.

[qam1]

While I am by no means letting the so called greatest generation off, A case can be made that at the time all these programs were created they couldn't have foreseen the mess they would become (i.e. they couldn't have predicted a baby boom followed by a baby bust)

But the Baby Boomers who are in power now know full well the disaster coming and not only are they not doing anything to prevent it or even lessen the impact, They are piling more and more goodies on for themselves, They truly are the worst generation in American history and they are only going to get worse. Unlike the Greatest Generation a large number of them (majority?) haven't saved anything at all for retirement and even as SS collapses around them they are going to be hollering to keep their current life style and other baby boomer politicians are going to be willing to give it to them at our expense.

[Proud_texan]

I've gone back and forth on that one, certainly FDR had some real scum working for him. For instance the original Harold Ickes who, amoung other things, was his Secretary of the Interior and started the PWA. I don't hold a very high opinion of the Ickes family (notice how the Clinton version never held a position that required confirmation.....

On the other hand FDR was pretty sick by Potsdam and, as best as I can tell, he had allowed his administration to be pretty well inflitrated by commies.

So he was either a commie or a chump, maybe a bit of both, but tied with LBJ for visiting the biggest disasters on future generations.

BTW, thanks for the link, have it bookmarked for additional study, looks like great stuff, appreciate it.

[Proud_texan]

Yeah, and just trying taking a penny from the "greatest" who have, by and large, collected far more than they ever paid in and a pol will find themselves on the street corner washing windshields for spare change.

Sorry, but my generation is the biggest bunch of "gimmes" to come along, at least most boomers believe more in flying saucers than they do in seeing any social security.

I wasn't aware that the greatest had saved anything at all but were entirely SS dependent, could you provide a source? I don't know where I saw it but the amount in boomer 401k, Roth's, IRA's, etc. seemed to be reasonably impressive.

[RedWhiteBlue]

I don't know where I saw it but the amount in boomer 401k, Roth's, IRA's, etc. seemed to be reasonably impressive.

I can't quote any numbers, either, but I keep hearing doom-and-gloom stock market scenarios about what is going to happen when boomers start to get older and move their vast riskier equity holdings into the much more conservative bond arena.

[Polybius]

We are practically bankrupting this country by giving everything we can to the "Greatest Generation." On average, they collect seven times as much Social Security money as they put into the fund-

Is that figure weighted for inflation?

One hundred 1942 dollars were the equivalent of $1175.53 in 2002 dollars.

The Inflation Calculator

[DumpsterDiver]

I've got 4 scenarios why no one needs to do what you propose. -- 3. Commit some crimes, get caught, go to "jail" (or the "retirement village"), three squares a day and a roof over your head.

I am seriously considering this option. I need to check into the living conditions in federal prisons first (no state prisons for me) and then prioritize my list of crimes. It'll give me something to do with my free time.

[risk]

BTW, thanks for the link, have it bookmarked for additional study, looks like great stuff, appreciate it.

You're welcome. Please post your thoughts in a vanity or under a related article if you get the time.

To say that FDR loved Stalin is not to say that he himself was a communist. An interesting quote from French philospher Jean Paul Sartre right up until Soviet tanks entered Budhapest in 1956 believed that Russian communism had a future. In 1954 he blithely said, "there is a total freedom of criticism in the USSR."

Stalin had been conducting pogroms for decades by this time, and yet he was able to fool many outsiders, including Walter Duranty who recieved the 1932 Pulitzer prize. for his glowing report on Soviet progress. Lincoln Steffens after visiting Russian in 1919 said, I've seen the future, and it works!"

But others were very skeptical about communism well before Simon Sebag Montefiore says (with what proof?) that FDR wanted to use Stalin and the USSR as a balance against British imperialism. (I'm still not confident in that quote at all.)

I've seen the future, and it kills!

[FITZ]

Hey legal & illegal immigrants - jokes on YOU! The school system sucks and you'll be taxed-to-death to pay for my retirement entitlements. Hahahahah.

They have the last laugh --- you're paying for those kids they're having --- their post-natal bills and school --- all money that you could have for your retirement has to go to give them their free school, college, and health care. Also don't laugh but many of the immigrants coming in now are elderly, coming here for a cushy retirement themselves that they never contributed to.

[FITZ]

How is the younger generation selfish? Because we object to them confiscating OUR money for their retirement, leaving us with pennies on the dollar when it is our turn to collect our contributions?

Of course Socialism cuts both ways --- the older people have been getting robbed thousands of dollars a year to pay for schools, health care, and a lot more for "the children" --- being told that investing "in the children" is investing in their own future. Everyone is being robbed.

[FITZ]

How is the younger generation selfish? Because we object to them confiscating OUR money for their retirement, leaving us with pennies on the dollar when it is our turn to collect our contributions?

One thing though --- if your parents have to pay their own health care etc, a lot of the next generation is going to scream about losing their inheritances --- imagine if the elderly have to sell their homes to pay for what they want in health care --- then what do their offspring inherit? It's not just the elderly benefitting by all the free health care, it is also their heirs.