A ‘silver tsunami’ approaches, and the U.S. economy is not prepared

[Northeast Agent]

Opinion | A ‘silver tsunami’ approaches, and the U.S. economy is not prepared

In 2050, an expected 82 million older adults will represent 23% of the U.S. population.

www.msnbc.com

Because all those silver-haired boomers don't have the pensions or the savings that previous generations could count on, the massive cohort of aging Americans represents a tidal wave that will rock almost every aspect of our economy. AARP calls this demographic trend the "Silver Tsunami." Other financial forecasters have used a different metaphor, likening the trend to a massive iceberg that the ship of state can't maneuver around.

 

[annon123]

And of course since this has been able to be predicted for decades and decades the fact that no one has dealt with this for all these years also means this is, to some degree, the fall out from this crisis that could have been planned around in advance and partly prevented.

 

[somarco]

boomers don't have the pensions or the savings

This can be traced back to ERISA . . . a law with good intentions but bad results.

ERISA essentially made vesting possible while eliminating the idea of terminating employees before their 65th birthday to deny them access to a pension.

ERISA also addressed underfunded pensions that collapsed under years of mismanagement. The PBGC was created to rescue underfunded plans which ended up as a failsafe bailout. The initial PBGC premium was $1 per employee per year. Currently it is $106 and no longer a flat rate.

Defined benefit pensions were replaced with defined contribution plans . . . money purchase, profit sharing, ESOP's and eventually 401k.

Rules were expanded to allow employees to borrow from their plan and cash in when they left a plan. Employees were also given self directed investment choices.

 

[annon123]

When so many employers don't even have retirement programs, or their matching is 3%... it is incredibly difficult for lower income people to save enough money for 25-30 years of retirement expenses. Heck even middle income people can struggle with that. I live in a state that didn't expand medicaid (and after losing my job over 2 cancers in one year didn't make enough for ACA care). I had to go through a big chunk of my retirement savings to pay for several years of health care. Good thing I had it or I'd be dead but retirement is going to be a big struggle because of that (and because of less put into SS). If I had had a pension retirement plan I still would have struggled with medical expenses but I wouldn't have a retirement income crisis looming.

Yes money invested can grow but also retirement companies own a bit more than half the stock market and to due minimum distribution requirements there will be more people forced to take money out of their retirement funds and thus the stock market than there will be put in by the generations under them (many can't really save much for retirement until they are empty nesters). As a result the stock market will start to fall. Supply/demand. Those without pensions (which will be most of any generation after the parents of the boomers) will find the value of what they have saved is dropping and many won't have enough money to last through their entire life time.

I think what we are going to see is a growing population of homeless elderly. There already aren't enough senior HUD's and in some areas the waiting lists are 3-4+ years. There are still bunch of years of boomers to retire yet. Also many think they can sell their house (many don't get out of their homes until about 80) and will have all this money to pay for future expenses. The trouble is the McMansions so many own are going to need a lot of repairs due to the life span of the materials used to build them. And there will be too many of these big homes being sold with fewer people in the demographic categories that buy them. Supply/demand. Prices will drop.

Already we see the sector of housing with the fastest rising prices are in the (not a ton of steps to enter) smaller ranches and smaller homes with a full master bedroom/bath on the first floor. The boomers buying those are competing with new home buyers. Those are usually cheaper than buying into a senior community (and, of course, some seniors do not want to live in those).

On the other hand a growth sector will be health care for geriatric needs, assisted living, nursing homes... that will eventually be over built once boomers are dying in larger numbers and the number of people who need them drop (eg the baby bust generation...).

 

[somarco]

Everyone has different reasons for having little to no savings for retirement and many times, lack of planning, is not the culprit.

In dealing with folks 65+ I have found the following to be true . . .

Loss of job, including forced early retirement

Health, sickness or accident, combined with no insurance or having insurance but lacking funds to pay the OOP

Divorce or loss of spouse due to death can wreck a financial plan.

My clients are middle to upper income and earning is usually not the issue but spending may be out of control.


We know a couple in their 70's, both still working and earning good money ($250k per year) but yet they have refincanced their home multiple times, still have 30 years left (last refi 2024) and owe more than the original purchase price 40 years ago. Husband filed BK at least 3x in the last few years. No matter how much they bring in they manage to spend all of it and more.