What Will Likely Follow Retirement: More Work
Some observers fear that the typical behaviors of retirees – in particular, selling out of stock market positions and relocating to warmer climes – spell trouble for the U.S. economy. But what went before is never an advisable measuring stick when it comes to the baby boomer generation, for whom there are no guarantees.
Now that the oldest baby boomers are on the verge of retirement, panic has erupted over the future of Social Security – and investment markets. In recent years, most retirees have sold out of stock shares and attempted to generate a flow of current income with low-risk bonds and certificates of deposit. There has also been a trend of downsizing homes, as retirees snap up smaller holdings in regions that are sunnier or, in some cases, closer to family. Some analysts and commentators have tended to assume these trends will continue apace as baby boomers become the retirees of tomorrow. So far they’ve been right as we witnesse a bear market accompanied by a near collapse of the housing market.
While this vision of the future is plausible enough, baby boomers have turned their entire collective existence into a kind of homage to the unpredictable and the unexpected. In other words, stock market and real estate investors would be wise to avoid premature judgements: the generation that drove the longest bull market in American history may not be ready to pull up stakes and assume the senior citizen mantle just yet. The fact is that baby boomers almost certainly will not retire as early as expected, or at least will hope not to.
A widespread lack of savings among members of this generation, in part a product of their lifestyle, also means boomers must work longer to enjoy the choices they have made and that to which they’ve become accustomed. It’s not just a matter of baby boomers living in luxury. A significant number have put off families until middle age; another hefty portion have had second families in recent years. This means many will still be putting kids through college at age 65, and therefore might not be ready for retirement at the usual age. And the standard retirement age, once 65, has increased.
Congress has raised the age at which full Social Security benefits are available: it is now 66 or 67, depending on the year in which one was born. Of course, how long full benefits will exist is now anyone’s guess. For the youngest boomers, only recently turned forty, assuming Uncle Sam will pick up the slack no longer makes sense.
On a brighter note, increased longevity means 65 is just not as “old” as it used to be. In the eyes of many, 80 might be old – but there’s no reason why a 65-year-old should slow down just because tradition dictates it. So, financial concerns and extended life spans mean many baby boomers will stay within the work force for longer than expected. On the other hand, a recent decline in average retirement age suggests some are moving in the other direction. Some boomers took early retirement packages amidst corporate downsizing crises; the job market had slowed, and getting out seemed the only option, whether they liked it or not.
Whether they retire early or late, however, the point is that baby boomers are likely to stagger their retirement over a much more protracted period of time than did earlier generations. Slotting boomers into an unsuitable mould will leave a lot of observers confounded.