There was an article in the WSJ about Boomers waking up to find themselves upside down financially and running out of time before retirement. I thought that with the markets roiled with Mid-East tensions, Japan crisis, higher energy costs, Portugal going broke and domestic unrest I’d add my two cents into why many Boomers make it to retirement and others don’t. I’ll also share some ideas on how some, not all, Boomers can enhance their retirement.
In our day (Boomers) there has been a complete lack of formal education about how to manage money. Years ago a Detroit Piston (who actually graduated college!) went into a furniture store to outfit his manse and when he tried paying for it with a check he couldn’t figure out how to do it. A Detroit singing group (Boomer age) out of Motown Records was given a huge advance royalty check and told to invest it somewhere safe. They did. They put the un-cashed check into a safe deposit box and it remained there for several years!
‘We thought we had the perfect plan…we were buying $60 a bottle wine and thinking nothing of it and now we drink box wine,’ said Patti Webster in a WSJ Feb 2011 interview, ‘Boomers Find 401(k) Plans Come Up Short.
Is there anyone besides me that sees in that statement that the blame is always on the 401k plans, the economy or rotten Wall Street brokers and banks and not on the actions of the individual. The one thing that we know for certain is that some Boomers who fail will not fault themselves.
‘She (Webster) has cut back spending on entertainment and organic food…” WSJ, February 19, 2011. (Of course, that’s one of the first things I do is cut down on my Whole Foods shopping and latte’s at La Starbucks when I feel financially pinched. Are we even on the same planet here?)
I won’t bore you with the entire WSJ article, which was extensive and definitely weird, but it basically reported that the income needed by the Boomer's Webster is about $35,000 a year above and beyond Social Security and the people described don’t have the assets to create that kind of income. It doesn’t take a genius to figure those folks were living the life and not worrying about tomorrow. The blame for coming up short, of course, is on the 401k plan and the two recessions in the last 13 years. It is never about themselves. It’s all about the other guy, the plans that don’t work and the thumb sucking poor-poor us.
According to Time Magazine one out of four Boomers knows that they will have to work until they drop. This same percentage, or 25%, of all Boomers have saved nothing for retirement.
The strange part is that millions of others not only survived the recessions and the global meltdowns but are in financial positions pretty close to where they were before the 2008 depression.
A French diplomat said, ‘The Chinese save and export, the Europeans consume and the Americans buy and borrow.’
The reality is that today, and for decades past, there are more ways to be rewarded in saving money through tax deferral and benefits than at any previous time. There are 401k plans, IRAs both Roth and Traditional, 529 Plans, Variable Annuities and information on how to manage money from a wealth of sources.
Our grandparents never had the kind of resources we have today and somehow managed to survive, raise families and retire with dignity and comfort. Today some Boomers have a tough time making ends-meet with two incomes when previous generations had but one.
Live within your means means living within your means.
Some Boomers just don’t like living within their means. Some Boomers want to live like the people who are on television. Some Boomers just don’t get it. Some Boomers, and I know a few, will never get it. I know Boomers that don’t like to cook, clean or work with their hands. Given a choice between doing yucky things for a living and starving they’d pick starving. I’m willing to bet you know people like that too.
In the day, pre-401k and defined benefit pension, our grandparents actually paid cash for their purchases, used something called a lay-away and set aside a certain amount each paycheck for emergencies, education and retirement. This was before social security, pension, Medicare or Medicaid. Our ancestors understood that they had to take care of themselves because no one else was going to do it. Some of our grandparents, fresh from a foreign country, even spoke English.
Initially Social security and employer sponsored retirement plans were not meant to be the be-all-end-all .
Following their parents and after the rescuing the world from Fascism the Greatest Generation, during their working lifetime, were able to browbeat and blackmail employers with union demands, get unsustainable benefit packages and lifetime entitlement packages. In the Greatest Generation’s Day there wasn’t just a chicken in every pot there was a two car garage, the suburban lifestyle and a color television. They passed those negotiation tools down to their children to continue the social and unrealistic experiment, ‘The Corporate Welfare State’.
We all know the story of the GM laborer who swept floors for thirty years earning almost one hundred thousand a year by the time he retired. If you told that story to a Chinese laborer they wouldn’t believe you. In the USA this was more common when working for the Big Three then not. In the Greatest Generation’s day there was no need for an education but only a strong labor union.
Back in the day if you were a Boomer working for one of the auto companies or suppliers you need not save, invest, buy insurance or worry about retirement. All that was negotiated and paid for. Boomers also had health care, free or close to it legal services and later a toll-free line to day-trade their 401k retirement account.
Boomers grew up in that Everything- paid- by- the- company environment and it was only natural that they wanted more. It was the old ‘Company Store’ with no downside. There were more toys, more labor saving devices and more leisure time. All that came with a silent insidious future cost.
Not that long ago I’d ask a few part-time working wives if they thought of putting away some of their earnings into an IRA and they’d look at me as if I was nuts. ‘Why should I save,’ said one in a huff, ‘my husband works for GM and everything I make is for me to spend.’
Those days are gone. Here are a few ideas for those Boomers with a skill, education and employment that want to turn around their retirement:
- Decide you are going to be a cash only rather than a credit person.
- Create a budget- examine all charges, lunches and items bought/charged to understand your spending habits. (Secret is that very few actually budget or understand how to budget.)
- If possible remortgage at current rates if you still have a mortgage.
- Don’t roll your credit card bills into a new mortgage.
- Shop credit cards at bank/credit union loans to pay off credit cards at a reasonable fixed rate. Go to www.bankrate.com to shop rates and credit cards nationally and locally.
- Don’t cancel your current credit cards because it will create a black mark on your financial record.
- Reexamine your retirement plan. Reallocate or have someone who knows how to manage money to reallocate.
- Start cutting costs or eliminating things you do not need: Go to basic cable, shop cell phone, car, home and life insurance, eliminate or cut entertainment costs (www.groupon.com) etc. Learn how to use coupons (www.coupons.com) buy generic groceries, visit on-line sites that help in becoming a frugal shopper.
- Add any savings into your 401k or retirement plan.
- If you’re healthy, and able, work as long as you can and invest as much as you can. (Try living on a retirement income as a test.)
- In financial hot water - Don’t hire those 1-800 We’ll Take Your Money Budget Firms advertising on late-nite television. Do talk to your CPA or financial advisor.
- Successful businesses have a Business Plan. They know where they are, where they want to be and what to do if things go upside down. Learn and do a business plan for your life. Call your advisor or planner for help.
That’s my dozen do’s. The most important thing is to use common sense as you go about rebuilding and resaving for yourself.
Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.
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