Doom and gloom propaganda: Boomer retirement

The AP has a story on Fox that is a study in modern media propaganda: Baby boomers near 65 with retirements in jeopardy. Careful reading reveals some interesting facts.

Reliance on stocks and how that is bad is a common theme of those trying to prove privatization of retirement is a bad idea. The story, though, says the S&P 500 has had a total return of 4% since 2000. That contrasts to the historical 8%. That is probably an average annual return. The CPI Calculator says there’s been a 27% cost of living increase in that period. A time value of money calculator indicates that the 4% annual return would yield $48 over ten years. That comparison, stocks returning well above inflation, indicates the opposite of the point the AP is trying to make.

Then there is the common “baby boomers have not saved very effectively for retirement and are still retiring too early” meme. That contrasts with those stocks in 401(k) plans, the 15% who still have private sector pensions, and all of the other tax favored retirement investments.

The mortgage crisis and depreciated home values is also set as a crisis for baby boomers. “Nearly two in three people age 55 to 64 had a mortgage in 2007, with a median debt of $85,000.” The thing is, though, that folks nearing retirement often have targeted owning their house free and clear by the time they retire so they usually bought their house well before the bubble in values and don’t have much of a mortgage left to worry about. That $85k mortgage is probably on a house still worth well over $200k.

Another fear point is the assertion that “Some 51 percent of early boomer households, headed by those ages 55 to 64, face a retirement with lower living standards, according to a 2009 study by the Center for Retirement Research at Boston College.” Anyone who has done any retirement planning knows that many costs and expenses one encounters when active in the workforce will not be a part of the retirement lifestyle. Retirement is all about scaling back. The question is how much. Assertions like this possibly presume too much.

The cost of medical care is one to worry about, which is why it is a subject of a lot of legislative effort. The article says $187k to $213k will be needed for a 55 year old to be 90% certain of covering future medical costs supplementing Medicare.

These ‘never have enough’ stories focus on doom and gloom. They might better focus on how to retire on that average 401(k) balance of $150k they cite and how many folks are managing to do quite well, thank you, on much less. It is good to have high goals, but there is a place for reality as well.

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