The crisis facing the baby boomer and retirement isn’t a pipe dream. It’s real.
Here’s a scenario to seriously consider. An elderly gentleman gave his credit card to the cashier to pay for his purchase. The cashier inserted the card into the machine. And . . .bam! short of funds! Not enough balance in the card. What an embarrassment! With all those other customers looking.
If you are a baby boomer who is about to retire or has already retired, this could be you. Would you allow this to happen to you? Just the one time when you got the chance to own that sporty jacket, the one you’ve been hoping to buy, and you’re short of funds!
Sometimes, in your haste to grab something before others do, you forget to check. These things happen to other people too. But, in your case – just that one time – it was a disaster.
Do You Have to Suffer Through All This?
Why should a baby boomer be placed in such a situation? Contrary to all those talk about baby boomers being to blame for their own predicament in their retirement, the baby boomer is, in fact, a victim. A victim of events over which he or she has no control.
Baby boomers are those born between 1946 and 1964. Those turning 65, averages 10,000 per day. That means 3,650,000 likely retirees per year. Studies show that baby boomers need at least $600,000.00 at the time of their retirement to be able to live comfortably.
But, the reality is more dire than bright. A recent PWC survey showed that majority (37%) of baby boomers have less than $50,000.00 in savings at the time of retirement. Only 15% have over $500,000.00 in savings.
The data are shown on the table below.
(Source: Motley Fool: Ted Campbell: TMFEB Capital: extracted May 29, 2018; 9:07 PM.)
No Comfort Ahead
Far from the reality of retiring in comfort, baby boomers actually face a crisis upon retirement. Based on data from the Bureau of Labor Statistics, retiring is costly and not at all comfortable, especially if you are short of funds.
Data extracted from the BLS show the expenses profile of still employed baby boomers aged 65 and above: (as of 2015-2016 Consumer Expenditure Survey, Net income: $43,498.00)
(Source: Bureau of Labor Statistics: Extracted May, 28, 2018)
** $43,498.00 – $45,223.00 = -$1,725.00 (deficit)
The data from the Bureau of Labor Statistics showed total expenses of $45,223.00. Income after taxes was at $43,498.00. This shows a deficit after expenses of $1,725.00. For the baby boomer even working beyond retirement doesn’t show much promise.
The biggest item of expense is housing, representing nearly half of the total expenditure. Next is transportation the big bulk of which constitutes vehicle purchase and maintenance.
Another significant item of expense is healthcare, which stood at 13% of the total expense, and 13.51% of net income.
Considering the income level and the negative buffer amount after expenses, many baby boomers of retirement age are forced to continue working to be able to save more and retire more comfortably, hopefully.
However, continuing to work beyond retirement isn’t very hopeful either.
An analysis of the wage dollar versus inflation shows its weakening power over the last two decades, beginning in the late 1990’s.
The analysis is shown below. The figures for 2018 are projections using the BLS CPI calculator.
a) 160 hours of work per month, based on a 40-hour week.
b) Extra work-hours excluded.
The table above shows that in 1938, when the Fair Labor Standard Act was enacted, the Federal Minimum Wage was $0.25 per hour, which was equivalent in real value to 16.60 times that of what it was actually worth. The figure 16.60 represents the purchasing power index of the wage dollar.
This figure is arrived at by dividing the 2014 dollar constant (2014=100 ) with the minimum wage per hour. The 2014 dollar is a constant used by the BLS (Bureau of Labor Standards) to adjust for inflation.
This means that $0.25 can buy goods and services amounting to $4.15. In monthly terms, assuming 160 hours of work, the purchasing power of the wage dollar in 1938 was $664.00, which was 16.60 times that of the actual wage of $40.00.
But, you will notice the decline of the purchasing power over the years. When the dollar wage gains parity with the purchasing power, the worker would be hard-pressed to make ends meet. This means he has barely enough for savings.
A near parity was reached between 1979-1980 when the wage dollar almost matched the purchasing power index. By 2009, the wage per hour can only buy 1.06x its actual worth, and hourly wage almost matched the purchasing power of the 2014 dollar.
The Deteriorating Purchasing Power
You can see that despite wage increases from 1990 to 2009, the buying power of the wage dollar continued to deteriorate.
The graph below shows the relationship of the wage dollar with its purchasing power.
The video below from a presentation by TIME shows in graphic detail the interaction of these two variables.
So, what does this all mean for you the baby boomer? This means that you have find a way to get out of the crisis. One good way is to look for the best home business on the internet.
There are many affiliate marketing groups that could make a real difference in the troublesome financial life of the baby boomer. Other than to continue working even in your old age, this is perhaps the best option for you as you can stay at home, and don’t need to drive or commute to work.
There is also the added advantage of you being able to take breaks when you need to without a boss looking over your shoulder. You can also choose when you want to work.
While it is true that rewards only come with hard work, and there’s no easy path to success, still when you work in your own online home business you are working for yourself, and your time is yours.