Wednesday, September 01, 2010

The Peculiar Dynamic of Boomers' Non-Retirement

A generation too poor to retire but healthy enough to keep working into their 70s is a new and not necessarily positive phenomenon.

A funny thing happened on the way to the Golden Years for the nation's Baby Boomers--they're not retiring.

There have been news articles on this phenomenon since the Great Recession sank its teeth into the Boomers' collective fantasy of retiring on the unearned swag generated by their homes and/or stock market holdings--for example, Boomers May Not Retire.

The implosion of the housing fantasy and the 40% haircut to 401K and IRA retirement funds since 2007 have made it impossible for many to retire according to their previous plans.

Just within our own circle of family, friends and contacts, we see people who could retire at 65 sticking it out to 70 or even longer. One is extending his state university career because his mortgage is so large; a woman who works at a private school is still working at 72 because her two sons (both pushing 40) are dilettantes who are still living off Mom's income (one lives at home, the other depends on his parents to pay his rent while he pursues a theatre career).

In the good old days, one worked as a waiter or cabbie to fund one's theatre/acting aspirations. Apparently it is now acceptable to avoid scutwork jobs and live off one's parents until they expire, at which point an inheritance (their life insurance and real estate holdings) should offer years more of living free from the burdens of making an income.

On the other hand, if all these aging Boomers retired, then younger people could take over their jobs, and make their own living.

Isn't this a peculiar dynamic? Boomers can't retire for financial reasons, so they cling to their careers, depriving younger people of jobs, who are then dependent on Boomers working into their 70s.

We also know people whose parents have passed away this year who will inherit a handsome sum of cash in the mid-to-high six-figures, enough to fund their upper-middle class lifestyle for some time to come.

Interestingly, 92% of Americans receive no inheritance (I raise my hand here) and only 1.6% of Americans receive $100,000 or more in inheritance.

It seems a tiny sliver of the Baby Boomers stand to inherit substantial wealth, removing the need to earn a living, while tens of millions of other Boomers will work into their 70s in order to pay down stupendous mortgages taken on in the bubble years and fund their offspring's college and low-income, low-opportunity life beyond college.

The only Boomers we know who are retiring like clockwork are those who work for the government, Federal, state or local with hefty pensions--in some cases after gaming the system to boost their pension. (That includes one of my cousins, so I know exactly how the scam works for fire department employees.)

With loose morals and looting being not just acceptable but normalized, no wonder the public pension system is careening off a cliff.

Other Boomers we know are either getting Social Security the day they qualify, or are planning to do so. That may be one reason why the supposedly endless surpluses in Social Security have vanished into deficits covered by other tax revenues.

Bottom line: a tiny percentage of Boomers will inherit substantial wealth, the 17% who work for "the gummit" will exit with pensions and benefits private sector retirees can only dream about, leaving many of the other 83% to labor until they drop dead or are too enfeebled to work.

The younger generations are left with the bitter fruit of excess and greed: the government jobs vacated by Boomers are in many cases vanishing as state and local governments are slashing jobs in order to fund the bloated pensions for Boomers.

Instead of clearing out and opening up opportunities for younger workers, the private-sector Boomers are clinging to their jobs out of financial neccessity.

I say this as an observation, not as a setup for a "solution." I don't see any solution; I sympathize with the Boomers who have seen their retirement funds torched by stock and housing declines, and I also sympathize with the young generation who is chafing under limited opportunities as people who should be retiring or moving out of fulltime jobs are working into their 70s.

Here is a related entry of note, chockfull of facts and charts: Why Private Employment Is In Structural Decline (June 8, 2010).

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