I have bad news for Baby Boomers: you are acting like your parents. According to a study by the Boston College Retirement Research Center, baby boomers are accumulating wealth at the same rate as previous generations. That may not seem like a problem, but his parents often had generous pensions to draw on. Many Baby Boomers do not have any pensions and those who do face the possibility of being withdrawn by their company in the next few years.
Counting on investments
They have another similarity to their parents … they believe that their investments can work miracles. In a New York Life survey, people between the ages of 41 and 92 were asked what the “safe” withdrawal rate was for retirement savings. Insurance is defined as the rate at which you could withdraw money and it does not run out during retirement.
Of those surveyed, 40% had no idea … not surprising until you realize that half of the group was probably already retired and the other was getting closer. If they were already taking money out or about to, wouldn’t it have been nice if they had an idea of what a sustainable withdrawal rate looked like?
Almost 30% of those surveyed thought they could get 10% or more. You’ve probably heard that stocks return more than 10% a year. Of course, they forgot to take into account some minor facts like, 1) stocks don’t make 10% every year and sometimes they have several years of decline in a row, 2) even if stocks returned 10%, there would be With no possibility of growth and no growth, inflation reduces purchasing power every day, and 3) I know very few people in their 70s, 80s and 90s who want to have 100% of their money in stocks, especially now.
Ask a financial advisor (at least one who knows what they’re doing) and they’ll tell you what only 10% of respondents did: The “safe” magic number is somewhere around 4-5%. Survey synopsis: 40% had no idea, 50% were going to be spent in poverty, and 10% were in the stadium.
Live long and prosper
Compounding all of these problems is the likely fact that Baby Boomers will outlive their parents and potentially their money. According to the American Academy of Actuaries, today a 65-year-old woman has about a 20% chance of living to 95 (sorry guys, her chances are only a little more than half).
People think I’m a bit out of line to want to make sure their money lasts to 100 years, but there is a reason for my insanity: If my husband and wife reach 65, there is a 28% chance of let one of them do it. blow out the candles on your 95th birthday. If you don’t plan on having your money last to age 95 or older, you run a 1 in 4 greater risk that the money will run out sooner than you or your spouse.
Charge it!
Oh, and before you think all I have is good news (yes, that was a sarcastic comment), Baby Boomers are knee deep in debt. Not that the country itself is doing better. According to a Direxion Funds article, 25 years ago, the US economy was $ 3.1 trillion in size and our nation had a national debt of $ 1.0 trillion. Today the economy is four times greater and our national debt is ten times greater.
Bottom line
Postwar parents had pensions, spent miserably, didn’t live long, and had little debt. So Baby Boomers (and the rest of you), grow up and stop acting like your parents. You can’t afford it.