When someone defends baby boomers against our critics, there is none better than Brent Green, an expert in baby boomer marketing and advertising and Google’s top-rated speaker on the subject of baby boomers. Brent tells BoomerCafé he is tired of hearing critics carp about the costly impact of baby boomers retiring, when in fact there are Five Forces Destroying Baby Boomer Retirement.
Cynics lambaste Baby Boomers for our excesses, self-absorption, and failure to plan wisely for the inevitable consequences of aging. What accusers charge is, this country has too many over-leveraged people in middle-age, racking up credit card debt and at the threshold of insolvency, a massive retirement planning malfunction.
Some dire warnings estimate that at least one-third of our generation may be financially unprepared for retirement.
According to AARP’s analysis of Federal Reserve data, Leading-Edge Boomers — those of us born between 1946 and 1955 — had a median net worth just ten years ago of just $146,000, including home equity.
However, closer examination of sociological and demographic factors reveals other issues contributing to why many Boomers may be inadequately prepared for retirement.
1) A history of generational overcrowding
In the short span of 20 years, from 1946 to 1964, America grew by 76 million Boomers. The country was not equipped for this population explosion.
Boomers share overcrowding nightmares both large and small, beginning with irritants like snaking lines encircling movie theaters and getting more significant from there. We recall public school classes convening in temporary manufactured structures erected to compensate for insufficient space inside old school buildings. We remember competing against peers at every turn, from getting into a good university to winning a promotion.
It has always been a buyer’s market when it comes to tapping the Boomer human resources aquifer. Overcrowding has limited careers and opportunities for many. Doors have not opened; promotions have not happened; salaries have not steadily increased.
2) Corporate downsizing
In 1995, the New York Times ran a series of articles about job erosion across America, leading eventually to a book entitled The Downsizing of America. As the editors observed, between 1979 and 1995, 43-million jobs vanished. “And while many more have been created, increasingly, the jobs that are disappearing are those of higher-paid, white-collar workers, and many of the new jobs pay much less than those they replaced.”
Boomers were often the first to endure sacrificial “resource reallocations” because we populated the most vulnerable middle-management jobs. A new language emerged to describe our plight: downsized, separated, severed, unassigned, or surplused.
The situation for Boomers today is more tenuous than it was in the mid-’90s — and we are older and even more vulnerable. Too many vie for too few jobs.
Downsizing means job losses, but often it means more. As the New York Times concluded, “For two decades, most people had also seen their wages level off or decline, and now dispossessed workers were frequently finding that the replacement jobs available to them paid appreciably less than their lost positions. Everywhere, people were working longer hours and feeling expendable.”
3) Exportation of blue collar, then white collar jobs
Academy Award-winning documentary director Michael Moore has built a reputation as an irascible filmmaker. He first became nationally prominent when his contemptuous lens exposed General Motors for exporting manufacturing jobs from Flint, Michigan. The corporate policy decimated Flint, thrusting both the city and its workers into poverty.
Roger and Me was more than a feisty documentary; the film became a metaphor for the breakdown in loyalty between large corporations and workers. It warned those who hang on to the belief that a job well attended is a career entitlement.
The downsizing virus afflicting American blue-collar jobs then became a contagious trend for white-collar sectors.
Who could have imagined that high-tech workers in middle eastern countries would someday take over Boomers’ white-collar jobs for a fraction of Boomers’ annual salaries?
4) Shift from defined benefit to defined contribution retirement plans
Once upon a time, employers wanted to buy and reward loyalty. They accomplished this in part with guaranteed, or “defined benefit,” retirement plans. That was the governing view for most of the 20th Century.
Then along came “defined contribution” plans, the ubiquitous 401(k). In a growing economy, this type of plan could accumulate significant wealth in a shorter time, irrespective of length of tenure— an investment approach preferred by younger investors.
The number of employees covered by employer-paid defined benefit plans has fallen precipitously in the last two decades.
Furthermore, many Boomers will outlive their companies, and then what happens to their retirement accounts? Just ask former employees of Enron, Arthur Anderson, Global Crossing, or dozens of other dot-bomb era companies.
5) Market crashes that decimated market investments
The Employee Retirement Income Security Act, signed into law in 1974, made it possible for the traditional security of a long-term retirement plan to become a market shell game. This legislation allowed companies to throw the risk of funding retirement programs squarely on the shoulders of employees. And risk it has been.
On April 3, 2000, the U.S. NASDAQ exchange recorded its largest one-day fall, 26 years after the Employment Retirement Income Security Act became law. Thus began the process of evaporating retirement savings.
Corporate pension funds lost $630 billion— a 14-percent decline. Lost in this staggering number is a full accounting of the number of Baby Boomers whose private retirement accounts and long-term personal savings have been jeopardized or who have already suffered financial ruin.
For example, a high-profile video production executive in Denver watched his retirement nest egg shrivel from more than three million to less than $30,000 in eighteen months.
Forestalled or thwarted retirement savings bode badly for Boomers as well as older generations. Both the affluent minority and the struggling majority must recognize that the coming retirement funding crisis is a reflection of many complex demographic and sociological issues. It is rarely a consequence of failed moral rectitude.
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