Professor Mead still doesn’t quite get the Boomer Holocaust’s true horror

Via Meadia has what ought to be a pretty darned good option for some of the boomer retirees who (like MANY of their peers), have acted more like the grasshopper than the ant.

Now they are reaping the fruits of their profligacy. Pension programs across the country are going broke, as we’ve covered time and time again. Rising life expectancies could add as much as $97 billion to the tab according to the WSJ.

So boomers can rely on neither their own anemic savings nor on public pension plans to get them out of the hole they’ve dug for themselves.

But Via Meadia values mercy as well as justice, so we hasten to point out that there’s still some hope for those entering retirement age. Retirement expenses are much cheaper in other countries like Panama and Ecuador. And retiring abroad lets you live a much more lavish life on a tighter budget, and the kids only have to fly an hour or two past Florida to visit and chide you for the profligacy of your youth.

If only they could.  But the majority of them can’t. 

This isn’t a new issue — Chez Happycrow has been sounding the alarm on this issue long before it was an easy hit on a Google search.  And those GenX types who didn’t take this seriously and start trying to figure out how to set up retirement in spite of the declining earnings and low social mobility are in just as bad shape.   The GenX challenge is how to retire without any of the promotions or raises that the generation before them enjoyed — and not surprisingly, many of my cohort are failing, too. 

The answer, “discipline,” seems to be in short supply lately.  All those old 401k arguments might have meant something…except that so many people have already spent them.  If the bills pile up and your only option is to eat your 401k, your only real option is to downsize your lifestyle until it fits inside your belt.  But that’s considered harsh and uncaring language nowadays.

So why not say “the hell with it,” sell out, and go to Panama?

Well, there’s a little problem with that.  Who’s going to buy?  As we’ve pointed out, the entire rotten edifice that regards housing as an investment and cheers when housing prices go up (including this morning’s radio bobbleheads on NPR, which continue to think inside the box on the subject), still don’t get that housing is first and foremost a cost — the cost of not being homeless.  Since Boomers aren’t retiring, but are holding onto any job they can, as long as they can, with “I’ll just keep working” now turning into a Boomer non-retirement mantra, Milennials can’t afford to buy their houses.  And don’t look like they can afford to have enough kids to fund the pension programs, either.

Catch-22?

Well, there is some hope.  Boomers have chased the buy-and-flip for a long time, and perhaps counterintuitively, many of their houses are both newer and worth more than those owned by younger generational cohorts.  That means that they’re potentially prime rental properties, IF they’re unencumbered by a mortgage.  If, like many Boomers, the person in question is still carrying a mortgage, well… write it off.  That rent isn’t paying for Jamaica — it’s paying for the bank not to take its house back.  (That’s right, its house.  Until you’ve paid off the mortgage, you may be paying property taxes on that puppy, but you don’t own it).

So Mead’s partly right.  The select few who didn’t save enough, but did have the discipline at least to kill their mortgages and not get into HELOCS, etc, can pay a professional property manager 10% of their monthly take to manage the place,  and go retire someplace cheap on $800 a month.  If the thought of talking to people who speak another language scares them (oddly, I’ve encountered a lot of people with this problem), well, they speak English in Belize, and the climate there is easy on the arthritis.

It ain’t great.  But at least for the lucky few, Professor Mead’s got a point: it’s a hell of a lot better than the oncoming train wreck the rest of their peers are about to suffer.

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6 Comments

  1. sqt

     /  March 21, 2013

    I could write a dissertation on irresponsible boomers. My parents are the classic example of the entitlement mentality of that generation. They blew up financially after leveraging themselves heavily in their home and, of course, never saved a dime in their lives. After driving my brother into bankruptcy they looked to me to support them and I knew I’d end up broke and divorced within a year if I let them live with me.

    They ended up moving to Thailand (I have a brother that lives there) because they can live on my dad’s social security and disability over there. They’d probably only be able to afford a crappy apartment here.

    What really irks me about the whole thing is that my dad earned a *lot* of money in his time. Well above the average income. They could easily have save money for retirement but instead chose to blow the money on extravagant vacations and pointless junk. They don’t really talk to me now (thinking me ungrateful) but my husband and I sacrificed so much to try to establish ourselves and I wasn’t going to throw it away because my parents were too spoiled to curtail their spending to fund their own retirement.

    Reply
    • My Dad actually did everything right. My Mom’s spending habits were pure boomer, unfortunately (she’s passed now, but if she were still with us it’s quite clear I’d be supporting her, as she’d never be able to retire on her own). Lots of GenX is screwed. Fortunately, at least we know it’s coming, unlike so many of my Dad’s generation who refuse to even look at an unpleasant truth, let alone acknowledge one.

      Reply
      • sqt

         /  March 21, 2013

        Unfortunately both of my parents are spenders. My brother tells me that they spend to the extent of their income to this day. They’d spend more but they have no credit left.

        My husband is a financial consultant so he sees the real-life consequences of boomer-generation entitlement every day. We’re both pretty frugal (me more so than him actually). I don’t mind buying nice things, but that comes after all the bills are paid and the retirement account is topped off.

      • Cosigned. I’ve credit debt right now (puke) because of two emergencies that hit at the same time over the holidays, but otherwise, it’s a mad scramble to get us to a point where we can start paying US, rather than other people.

  2. Liz

     /  March 22, 2013

    My Dad was fifty when I was born (and my mom the product of post WWII Europe, very frugal). He was military and then owned a business after he retired, and they saved. What I’ve noticed (and Jimmy Rogers mentioned this recently) is that the current economy has an interest rate cycle that penalizes savers and those on fixed incomes. Retired people used to be able to live off of the interest, assuming they had amassed enough cash to invest in some sort of longterm budget plan. Now with interest rates at zero they’re living entirely off their savings.

    Also the baby boomers, unlike the prior generation (which tended to work for one company longterm and have a pension) are going to be dipping into those 401Ks soon….and what does that mean for those of us investing in our 401Ks now? It will have an impact. The stock market is held up by all of this newfound investment, and there probably won’t be enough new money coming in to balance the money moving out.

    I know a lot of people investing in commodities now….specifically gold (I know quite a few survivalist types). Gold is no panacea, its value is driven by supply and demand just like everything else. A person who ran to gold during the end of the Carter years has only recently broken even (not even yet, if adjusted for inflation). And of course the government has confiscated gold in the past.

    Reply
    • A lot of quality in here, Liz.
      The point the goldbugs make isn’t asset appreciation, but wealth-defense. There aren’t easy answers, but I think that it’s safe to say, with the feds pumping 85 bil into the stock market every month, that 401K money isn’t a huge deal.

      A 401K can be a valid and useful retirement tool. But it’s still an investment and not “savings.” The folks who were at retirement age and got **screwed** by the Enron collapse can vouch for that one.

      This is one of the primary reasons I’m such a big-gun-go guy on “kill your debt, any debt.” Debt payments are still useful in the face of currency devaluation and financial hijinx, and when the music finally stops (because this time isn’t different), your cost-of-survival is minimized.

      Reply

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