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Will you get to retire? Boomers, their kids headed for sad reality

With the Boomer generation and their children on their current path, retirement will not be a reality for many, but there is an answer and it lies within in ourselves.

Retirement no longer a priority

Considering the country’s last 40 years of economic history, one might conclude that retirement would be a top priority for most people. The 1970s brought us our first run-in with double digit inflation and interest rates. The 1980s began with a prime rate in excess of 20%. There was 14% inflation, give or take. The FHA interest rate hit around 16.5%. Unemployment was 9% — or higher if you believe the real, non-spun numbers.

The 1980s also saw the top marginal personal income tax rate slashed from 70% to 28%. Employment blew up positively, causing the unemployment rate to drop like a rock. The economy recovered, over 20 million jobs were added, and life was good.

Then, in the 1990s we endured the S&L ‘Crisis’. Commercial properties all over the nation ended up being sold for pennies on the dollar. Real estate in general was a no-go. In fact, I’d take it further. For around half that decade real estate was, to use an industry technical term, in limbo.

The only good thing about that decade was that after 10-15 years of drastically reduced taxes, welfare reform, and a reduction in capital gains taxes, our leaders in D.C. Gumped their way into a balanced budget — that is, as long as you didn’t look too closely at their accounting.

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Enter the Darth Vader Economy

The Bubble came — had its way with us, and left. It was akin to an economic F-4 tornado following 5-8 years of perpetual spring and summer. In the process, regular folk invested in the Nasdaq, lost the shirts off their backs at the start of the century. I had a couple clients who literally lost almost 40% of their retirement nest egg in that crash. Try goin’ from $500,000 to just over $300,000 faster than you can watch it happen.

Same thing happened on a bigger scale in 2008. Imagine being retired in 2007 when the stock market crash of 2008 hit. Or, how ’bout those poor people scheduled to retire in late 2008? That couldn’t have been a normal Thanksgiving.

The current unemployment fiction says over 8% of us are unemployed. Really? Yup, it’s true. ‘Course to get to that figure those in power found it necessary to remove more than a million citizens from the equation. Seems you’re not unemployed after a certain time period. Who knew?

Rents are now rising while vacancy rates are falling. Not everywhere, but it appears to be a nationwide trend. We’ll see. The percentage of Americans buying their own homes is decreasing annually. Most of us have realized by now, that this isn’t just another economic cycle which will end by completing the circle with a pretty ‘recovery bow’.

The retirements of millions of Boomer-Americans are not only gonna be postponed. Many will never truly retire. They will never stop working. Those who can’t will begin living with family, almost always one of their kids. If not, their kids will at least be providing significant financial support to fill the gap. This will necessarily stretch their kids’ budgets, while simultaneously transferring potential investment dollars to parent care dollars. I realize that’s not fun to read. It’s a whole buncha real though — and like a virus it’s already spreading.

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The Catch-22 for Boomers’ progeny

Many have indeed learned from watching older generations in their family retire less than well. The writing on the wall for thousands of Boomers’ kids is that one, if not both their parents will need them as they reach retirement age and older. On one hand they realize they need to prepare seriously for their own retirement. On the other hand reality inserts their parents into their longterm planning. They want to execute a solid retirement plan. But diverting significant investment capital to maintain Mom and/or Dad in their old age acts as a governor of sorts on how effective their plan can be.

What to do?

I hate to put it this way, but it depends. 401Ks are a virtual guaranteed loser. Ditto with IRAs. Let’s not debate those statements. Do your own surveys. Whenever I’ve challenged people to do that, they’re astounded by the fact they can’t locate anyone who’s retired with even a mediocre income via their job related ‘retirement plan’. Real estate investing takes seed capital and capital reserves. Most of ’em believe Social Security is an oxymoronic phrase — and why should be blame them? Pensions are only found (except for gov’t workers) in history books.

The only hope for BoomerKids

They need to face a harsh reality. The government isn’t their mommy. Trying to rob those who spend their lives as magnificent producers in order to fund their own needs is not only a losing strategy, it’s for losers. The majority of our kids better step up to the plate and realize any form of consistent collectivist government is a guaranteed FAIL. Millions are now watching with their own ‘lyin’ eyes’ how low the bar is set when their parents’ ‘Golden Years’ are financed by others’ efforts. Pretty soon those ‘others’ find a way to avoid playing the part of Peter in the Robbing Peter to pay Paul vignette.

Self reliance is the key. It’s what America was known for since its creation. We’re either gonna realize this and correct course, or we’ll pay the same price every citizen of every collectivist government has paid throughout history.  Complete and irreversible failure as a nation. Any nation is only as strong as it’s core beliefs and principles. They didn’t volunteer for this mission, but the offspring of the Boomer Generation will, for good or ill, be the pivot for America, the Idea. If they steer us back to our foundational values we’ll begin to pull back from the cliff’s edge. If, instead, they opt for keepin’ their hands in Peter’s pockets?

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They’re not far from livin’ in a world where everyone is a ‘Paul’ and Peter left town. Then retirement will be something their grandparents did.

Written By

Jeff Brown specializes in real estate investment for retirement, has practiced real estate for over 40 years and is a veteran of over 200 tax deferred exchanges, many multi-state. Brown is a second generation broker and works daily with the third generation. With CCIM training and decades of hands on experience, Brown's expertise is highly sought after, some of which he shares on his real estate investing blog.

19 Comments

19 Comments

  1. Roland Estrada

    March 15, 2012 at 2:37 am

    Amen brother!!

  2. Missy Caulk

    March 15, 2012 at 8:48 am

    Excellent, the Google+ button is not working. 🙁

  3. D Evans

    March 17, 2012 at 11:32 am

    401k’s, IRAs and Roths made us millionaires. Use them to your advantage.

  4. Teresa Boardman

    March 18, 2012 at 8:12 am

    some of this rings true but I can’t see children supporting parents. it just doesn’t happen which is a good thing. However I agree that many boomers will never stop working. because of that stock market crash, the recession and the housing crash I will need to work until I am at least 120 years old. Self employment is the only way to make that happen because people who are much over 50 rarely get job offers.

  5. Ryan

    April 9, 2012 at 10:58 am

    Aw, come on those sheep don’t need pensions. They don’t even need soical security. Their well-planned retirements will include vast stores of cat food and Ramen noodles.I read at HuffPo where some Dems in Congress were retaliating with Where are the jobs? since the house majority went to the GOP. Clearly that’s rhetorical because anyone with a pulse knows the GOP is exploiting the current situation without any real expectation of creating jobs despite what they might say at times.So in a political environment where many have drank the Kool-aid informing them that it’s not government’s job to help it is legitimate to ask what will help? and also why the only remedy available to the GOP (after possibly drowning government in the bathtub), corporate America, is not helping either. Isn’t it kind of strange this isn’t asked more? Good of you to point is out. Maybe it will catch on. Maybe the Dem leadership will start to play offense for the first time.Many say that the sheeple never turn their attention to the elite because they someday dream of joining the upper class. The sheeple would rather smack down the ones one rung higher on the ladder than move up themselves. That looks more like they’ve concluded reaching the upper class is an unattainable dream and they’re just spiteful. Clearly they trust the hand that feeds them poorly more than those who say they can change the hand that feeds.They can’t seem to get their heads around how it is exactly the corporate failure to help them that has made the corporate successes possible.

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