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Baby Boomers Resist Downsizing, Retirement Baby boomers are resistant to the idea of retirement, but could their stubbornness hurt their financial future? Find out why downsizing might be the right choice for baby boomers who haven't saved enough cash. If the population of the United States is a monster truck, the baby boomers are its massive, powerful wheels. The 76 million Americans born between 1946 and 1964 represent nearly a quarter of the country's overall population. They collectively control 40% of disposable income, and more than 70% of them are homeowners. Their economic power, therefore, is undeniable. However, as the oldest baby boomers approach prime age for retirement, it appears few are ready for this next life stage either psychologically or financially. A 1993 study sponsored by Merrill Lynch found baby boomers had saved only about one-third of the funds necessary to supply them in retirement. And, since the stock market has not exactly prospered since, the average boomer is not today sitting as pretty as he or she might be. The news isn't all grim, however. When economists count baby boomers' home equity in their financial calculations, financing retirement begins to look more feasible. The problem is that boomers are not taking full advantage of real estate assets, when they could translate appreciation into greater security. In other words, few boomers are selling their homes. When the AARP conducted one study of boomers' retirement savings trends, it found that factoring in home equity boosted baby boomers' retirement savings to 80% of the standard need. On the other hand, calculated separately from home equity, their savings represented only 35% of necessary accumulations. For some years now, the standard has been for a person or couple to downsize the family home around the time of retirement (and quite possibly move south), thereby freeing up cash that becomes an integral part of retirement funding. However, the ever-original boomers are overwhelmingly rejecting their parents' conception of retirement. Loathe to admit they are aging, they put off retirement and all that comes with it. Nearly 40% of all boomers surveyed by the AARP said they found retirement impossible to imagine, and only 16% said they plan to stop working entirely during retirement years. To this eternally youthful generation, the idea of downsizing and moving seems to represent some kind of capitulation. Many survey respondents, in fact, have plans to remodel, or even to buy larger homes. By staying put, though, boomers risk big losses in the event of economic and/or real estate downturns. In extreme cases, some could be forced to sell their homes in order to finance their later lives. Even worse, those who go into debt remodeling or upgrading could find their debt undermines the value of their property. To insure against such an outcome, baby boomers whose primary asset is their homes might want to consider selling sooner rather than later, given the current real estate market. Denial can be fun, but not at the expense of financial security. Much as they dislike the idea of retirement, boomers should ask themselves what they need more: the extra space, or the extra cash. Back To Mature Market News → Go To The GenerationTarget.com Mature Market Bookstore → |
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