In May, 2013, the Pew Charitable Trusts released a major study, "Retirement Security Across Generations: Are Americans Prepared for Their Golden Years?" This report explores how the Great Recession affected the wealth and retirement security of five age groups: Depression Babies born between 1926-35 and are 78-87 years old; War Babies born between 1936-45 and are age 68-77; Early Boomers born between 1946-55 and are age 58-67; Late Boomers born between 1956-65 and are age 48-57; and Generation Xers (Gen-Xers) born between 1966-75 and are age 38-47. It also tracks the wealth of each age cohort over the last two decades to assess the recession's impact on each group's financial security.
• Here is the effect of the 2007-2010 Great Recession on median net worth (total assets minus total debt) loss: Depression Babies lost 0% and only $465. War Babies lost 20% or $53,497. Early Boomers lost 28% or $67,853. Late Boomers lost 25% or $36,801. Gen-Xers lost 45% or $33,477. Excluding Depression Babies, who were already retired when the Great Recession hit, losses were so severe that in 2010, median wealth remained lower than it had been in 2004 for the other 4 age groups. In 2010, median net worth for the 5 age groups (oldest to youngest) was: $207,500, $212,300, $173,480, $110,870, and $41,600.
• Each of the three youngest age cohorts increased their debt significantly between 1989 and 2007 (leading up to the recession) and from 2007 to 2010 (coming out of the recession). In 2010, Gen-Xers had a median of more than $80,000 of debt; Late Boomers had about $60,000; Early Boomers had less than $40,000; By 2007, Depression babies had $0 and War Babies had just $15,000 of debt.
• High debt and low assets are dragging down Early Boomers, Late Boomers and Gen-Xers. Here are the Asset-to-Debt Ratios by age cohort in 2010: Depression Babies', assets exceeded debt by a ratio of more than 50 to 1; War Babies 27 times debt; Early Boomers 7 times; Late Boomers 4 times; and Gen-Xers' assets were less than twice their debt. This is not surprising, given that Baby Boomers were much bigger spenders than the Depression or War Babies and Gen-Xers looked to their Boomer parents for spending behavior. Student loan debt, which has been rising for each successive generation, surpassed $1 trillion last year, and exceeds total credit card debt. We have large numbers of Gen-Xers who feel crushed under their student debt burdens. Note: Federally-insured student loans are one of the few items that cannot be discharged in Bankruptcy Court. Until we get a resolution of this issue in Congress, on July 1, 2013, the interest rate on federally-subsidized Stafford student loans doubled from 3.4 to 6.8 percent.
• Pew then projected each age group's retirement income when members of the group were between 60 and 65 years old. The analysis compares the wealth of these groups to that of other age cohorts at similar ages to understand the relative status of the 5 groups. The replacement ratio is determined by each age group's retirement income as a percentage of its preretirement income. For couples, it was: 86 percent for Depression Babies; 99 percent for Warm Babies; 82 percent for Early Boomers; 59 percent for Late Boomers; and 50 percent for Gen-Xers.
Conclusion: the oldest three groups should be OK in retirement, especially if the Early Boomers receive an inheritance. The Late Boomers and Gen-Xers will have a drastic reduction in lifestyle once they retire. Their situation could be substantially worse if Social Security only pays 77 percent of projected benefits in 2033, when the assets in the Social Security Trust Funds are depleted. The action steps are: earn more, save more, don't lose money in investments, and retire later than planned.
Contact Dr. Wong at: (480) 706-0177 or haroldwong1@yahoo.com, Click on http://www.DrWongInvestorGuide.com for his previous articles and future seminars.
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• Here is the effect of the 2007-2010 Great Recession on median net worth (total assets minus total debt) loss: Depression Babies lost 0% and only $465. War Babies lost 20% or $53,497. Early Boomers lost 28% or $67,853. Late Boomers lost 25% or $36,801. Gen-Xers lost 45% or $33,477. Excluding Depression Babies, who were already retired when the Great Recession hit, losses were so severe that in 2010, median wealth remained lower than it had been in 2004 for the other 4 age groups. In 2010, median net worth for the 5 age groups (oldest to youngest) was: $207,500, $212,300, $173,480, $110,870, and $41,600.
• Each of the three youngest age cohorts increased their debt significantly between 1989 and 2007 (leading up to the recession) and from 2007 to 2010 (coming out of the recession). In 2010, Gen-Xers had a median of more than $80,000 of debt; Late Boomers had about $60,000; Early Boomers had less than $40,000; By 2007, Depression babies had $0 and War Babies had just $15,000 of debt.
• High debt and low assets are dragging down Early Boomers, Late Boomers and Gen-Xers. Here are the Asset-to-Debt Ratios by age cohort in 2010: Depression Babies', assets exceeded debt by a ratio of more than 50 to 1; War Babies 27 times debt; Early Boomers 7 times; Late Boomers 4 times; and Gen-Xers' assets were less than twice their debt. This is not surprising, given that Baby Boomers were much bigger spenders than the Depression or War Babies and Gen-Xers looked to their Boomer parents for spending behavior. Student loan debt, which has been rising for each successive generation, surpassed $1 trillion last year, and exceeds total credit card debt. We have large numbers of Gen-Xers who feel crushed under their student debt burdens. Note: Federally-insured student loans are one of the few items that cannot be discharged in Bankruptcy Court. Until we get a resolution of this issue in Congress, on July 1, 2013, the interest rate on federally-subsidized Stafford student loans doubled from 3.4 to 6.8 percent.
• Pew then projected each age group's retirement income when members of the group were between 60 and 65 years old. The analysis compares the wealth of these groups to that of other age cohorts at similar ages to understand the relative status of the 5 groups. The replacement ratio is determined by each age group's retirement income as a percentage of its preretirement income. For couples, it was: 86 percent for Depression Babies; 99 percent for Warm Babies; 82 percent for Early Boomers; 59 percent for Late Boomers; and 50 percent for Gen-Xers.
Conclusion: the oldest three groups should be OK in retirement, especially if the Early Boomers receive an inheritance. The Late Boomers and Gen-Xers will have a drastic reduction in lifestyle once they retire. Their situation could be substantially worse if Social Security only pays 77 percent of projected benefits in 2033, when the assets in the Social Security Trust Funds are depleted. The action steps are: earn more, save more, don't lose money in investments, and retire later than planned.
Contact Dr. Wong at: (480) 706-0177 or haroldwong1@yahoo.com, Click on http://www.DrWongInvestorGuide.com for his previous articles and future seminars.
Article Source: http://EzineArticles.com/?expert=Harold_Wong
Article Source: http://EzineArticles.com/8314151
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