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Archive for September 2008

September 27, 2008

Milestone: First Baby Boomer Receives Social Security

It’s now official: baby boomers have started to collect Social Security.

The first one is named Kathleen Casey-Kirschling, and she was born one second after midnight on January 1st, 1946. (Baby boomers are generally defined as all those who were born in a year from 1946—the year after World War II ended—until 1964—the year the birth control pill became available.)

Kathleen is a 62-year-old retired teacher living in Earleville, Maryland and Vero Beach, Florida. Here is a video of her promoting the use of the Social Security Administration’s online application system:

There are about 80 million baby boomers in the U.S. Over the next twenty years, they will become eligible for Social Security. That averages out to about 10,000 new recipients per day.

If present trends continue unchanged, the Social Security system will have to start paying out more in benefits than it receives in contributions in 2017. Its reserves will be completely depleted in 2041. Kathleen will be 95 then, but the youngest boomers will only be 77..

September 22, 2008

More and More Boomers Delaying Retirement

retirement pie chart

Source: Wall Street Journal

It had to happen. As defined-benefit programs go the way of the buggy whip and the rotary dial telephone; as savings rates drop; and as nest eggs shrivel due to stock market woes, more and more baby boomers are making an unpleasant discovery: unlike previous generations, they can’t simply stop working at age 65 and still make ends meet.

As the Wall Street Journal reports, the clear message of the economy to baby boomers is: “Not so fast.”

While it’s unpleasant to be forced to do anything, voluntarily delaying retirement can often be a good thing. From the standpoint of retirement income level, every additional year worked provides a triple benefit: it allows for additional savings to be accumulated; it at least creates the possibility of investment growth; and, of course, there is one less year over which retirement distributions will be spread.

Still, this development is ominous. It may not be the end of the world if the average retirement age increases from 65 to 66 or 67. But what if people are forced to work well into their 70s, or even 80s, to survive? Not a pretty picture…

September 18, 2008

Wall Street Woes and Retirement Investing: Keep a Level Head

The recent wild gyrations—mostly downward—of stock market prices have badly shaken many future retirees. Some have seen their nest eggs drop precipitously, and are wondering what to do.

Our advice: whatever you do, don’t panic. Attempts to “time the market,” i.e. to “buy low and sell high” usually fail, for two reasons. First, there is no reliable way to predict what the market will do next no matter what the situation. (If there were, anyone who possessed it could quickly become a billionaire.) Second, emotions tend to cloud judgment, making matters even worse. Right after a big dip, many investors are tempted to bail out at what often turns out to be the worst possible moment (think of the people that sold stocks in 1932, which was the best buying opportunity of all time). Similarly, when markets go up, up, up, there’s a big temptation to buy at what may well be the peak.

If you decide that the market’s volatility is unacceptable to you, you may wish to reallocate some of your assets. This usually means exchanging riskier investments for safer ones: selling stocks and buying fixed-income investments. Shop around for the best rates on CDs or bonds. Then take a calm look at your stocks and stock mutual funds, and decide how much you wish to sell. If it’s a large portion, consider selling gradually, and transitioning into fixed income investments. But don’t engage in “panic” selling. In uncertain times, more than ever, you need to keep a level head.

September 12, 2008

A National Disgrace: Senior Citizens Being Forced Into Bankruptcy

Bankruptcy is a humiliating, harrowing experience for anyone. But when a senior citizen is forced to undergo it, it extracts an especially heavy emotional toll. Seniors simply don’t have decades of life ahead of them in which to advance their careers, save money, and make the arduous climb out of the financial pit that bankruptcy creates. Many are on fixed incomes, and the repayment plans required by recently enacted new bankruptcy legislation create, for many, the equivalent of a lifetime sentence to poverty. On top of all this, many older Americans still adhere to the old ethos of live-within-your-means and if-you-can’t-afford-it-do-without-it. In short, among the senior population, bankruptcy doesn’t just create problems. It permanently ruins lives.

Yet seniors, according to a recent study, are the demographic group among which bankruptcies are increasing the most rapidly. In 1991, people 55 and older accounted for only 8 percent of bankruptcy filings. By 2007, that number had soared to 22 percent.
[Read more]

September 7, 2008

Obama: Don’t Privatize Social Security; McCain: Yes, Er No, Er Maybe

At a national AARP event, Barack Obama has reiterated his opposition to privatization of Social Security:

“[S]ecuring your future starts with protecting Social Security… For millions of Americans, it’s the very difference between a comfortable retirement and falling into poverty. More than half of seniors depend on it for more than half of their income. And as the first baby boomers become eligible for benefits this year, there are steps we can take to secure its future for generations to come. That doesn’t mean embracing George Bush’s failed privatization scheme, as John McCain has.

That’s a clear statement. John McCain appears, or appeared, to be on the other side of the issue. He has

OTOH, he has also backpedaled. He has said that he “has not made [Social Security privatization] a campaign promise.” He has even declared, “I’m not for, quote, privatizing Social Security. I never have been. I never will be.”

Where does McCain really stand on privatization? Who knows. It sounds like he was orginally for it, but decided to hedge his bets once he saw how unpopular the Bush plan was.

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