From Bloomberg:

The expectation that each successive generation will be better off financially than the prior is no longer valid. Contributing to this new reality has been the diminishing role of traditional pension plans with defined benefits in favor of 401(k) savings plans.

Source: Bloomberg

Category: 401(k), Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “Typical Boomer Retirement Modest Compared to Parents’”

  1. spencer says:

    I remember when defined benefits programs started to become widespread.

    I tried to convince people it was a pay cut but nobody would believe me and they kept insisting it was good for them.

    Wonder what the same people say now.

    • Iamthe50percent says:

      I think you mean “defined contribution”. Defined benefit plans were never widespread but were common in the largest companies.

      They certainly were good for me as I was in the engineering business where, typically, no one stayed at one company long enough to vest in the pension plan. The pensions looked good on paper but few actually received them. I do admit that most people cashed out their 401K’s when they changed jobs. (Not I)

  2. bigsteve says:

    This is not a new situation. Only a minority of workers ever had a pension. And Social Security has been the bulk of retirees income since shortly after it was created. Having the income, discipline and savvy to invest for retirement over decades has always been in the minority whether you do it or a professional does it (pension). I read an article from “The Motley Fool” that stated this. So this is not my original idea although my personal experience of others in retirement supports this.

    This is why there is now talk of increasing Social Security not cut it by some people. I am not casting envious eyes on others wealth on my part. I will shortly be retire and in the 36% of those in the chart who will not suffer a living standard cut in retirement. But we do not really have any more of an retirement crisis now than we have had since Social Security was created.

  3. theexpertisin says:

    Could it be that folks have not lived far enough below their means, expecting investments in securities to provide excess returns to compensate for spending too large pre-retirement?

  4. abbottmd says:

    Hard to believe people can even retire with $200,000 in household net worth. When these groups get the double wammy of reductions in social security, I think generational warfare will heat up. Lots of people are going to be angry that the “greatest generation” had it so good in terms of benefits as standards of living decline for subsequent groups, after the younger ones helped fund the early retirements of the older group etc.

    • rd says:

      In my experience, the “greatest generation” people tend to live frugally within their means. They typically lived in modest houses without lots of extravagent demands. While they got a bit extra out of the Social Security system and many had pensions, the pensions tended to be modest and often not adjusted for inflation. The ones I know typically retired with little or not debt, took a few trips, and enjoyed getting together with friends at each others houses.

      The Bernanke policies have probably hit them the hardest since their “safe” income-producing assets of CDs, bonds etc. were converted into non-income producing assets. It would not surprise me if future data dumps show that their assets drop between 2010 to 2013 as they had to chew into their capital while the other groups’ assets rose during that period.

      • Iamthe50percent says:

        The Greatest Generation grew up in the Great Depression. I scarred them for life. We “profligate” boomers grew up during the greatest expansion in American history. It colored us for life too. Whatever you had or didn’t have as a kid is “normal”.

  5. Scott says:

    Who says it has to be this way? There are some great solutions to this problem for small business owners and their key personnel. It’s just that most of their tax and/or investment advisors either don’t know about the solutions, don’t understand them – or both.

  6. GGJr says:

    too bad they cut off the data at 2010 – seems like if MY portfolio has gone up about 50% in the last 2 years, so might a few of those other boomers in the stats….-

  7. rd says:

    I don’t think that there is enough data here to make a determination that boomers are worse off than their parents. Median and average pension income is actually relatively small for the private sector:

    http://www.pensionrights.org/publications/statistic/income-pensions
    http://www.pensionrights.org/publications/statistic/income-today%E2%80%99s-older-adults

    My interpretation fo the graphs above is that many of the over 65 crowd had conservative investments (bonds, CDs, etc.) and, if they owned a house, were in areas that didn’t get hit too hard by the housing crash. The below 65 groups had more “risk” assets (including houses) that lost value from 2006-2009.

    Bernanke’s ZIRP and QE probably means that the over 65 people’s incomes from assets have declined significantly. The graphs don’t show if the under-65 assets have increased in value as the bull market runs and the housing market recovers.

    From all of the data that I have seen, it appears the solution to retirement income is to give everybody Federal civil service or military pensions.

  8. b_thunder says:

    “The expectation that each successive generation will be better off financially than the prior is no longer valid.” But each successive generation of bankers and traders is better off financially than the prior one!

    That’s because the wealth *created* by each successive generation over the last 35-40 years (especially since the Reagan “revolution”, and even more so since the post-1998 bubble/bust/bailout policies) has been stolen, with the help of the government, by the financiers and the multinational corporations.

  9. jlj says:

    The largest macro cause of the modest retirement income for the boomers is that the huge gains in societal wealth since the late 1970′s has gone to the upper 1% or even more so the upper 0.1% of the population. For someone in the 20-80% range of the population they have “lost” anywhere between $10-20gs a year. Or their retirement income of $300k-$600k. The general wealth split from 1940′s to 1970′s was much more equitable and the middle class was able to save for retirement – even when it was typically only the father working.

    The second largest cause of the modest retirement income for the boomers is the interest rate paid on savings. Not bad for the boomer’s parents. Not so good for the boomer’s. Pushed people into the market. Would be interesting to see what $50k invested in late 80′s, in a mutual fund that ranked 75th or so for yearly returns, would be worth 30 years later.

  10. milbank says:

    The 28 years before BEFORE the “Financial Crisis.” . . . .

    http://www.motherjones.com/files/changeinshare.jpg

  11. milbank says:

    As important if not more important to what people had to invest in their retirement during those years was their income. . . .

    http://www.motherjones.com/files/averagehouseholdincome.jpg

  12. [...] Typical Boomer Retirement Modest Compared to Parents’. “The expectation that each successive generation will be better off financially than the prior is no longer valid. Contributing to this new reality has been the diminishing role of traditional pension plans with defined benefits in favor of 401(k) savings plans.” [...]