Baby Boom By: Group 7
What is the Baby Boom? • People born from 1946 to 1964 • Huge increase in birth rate • Cause by return of WWII Solders
Major Risks faced by baby boomers • Not financially ready for retirement • Social security is underfunded • Stock Market problems
Changing the Workforce • Average retirement ages is about 65 • Baby Boomers are starting to leave • Businesses losing skills
What’s the impact of their retirement? • Baby boomers start to leave the workforce, leaving less people to work for the society • America’s elderly are living longer and the cost of health care is ring dramatically. Two factors that make it expensive to take care of these retiring baby boomers • There is a risk that the next generation will not get enough social security • Baby boomers are taking their money out of the market, which makes the market unsteady?
Not Financially ready for retirement • Most baby boomer are ill-prepared for their retirement According to one recent survey, 36 percent of Americans say that they don’t contribute anything at all to retirement savings. • Their home equity was destroyed by recent financial crisis • 401ks were devastated when the stock market tanked Over 30 percent of U.S. investors currently in their sixties have more than 80% of their 401k invested in equities. So what happens if the stock market crashes again?
Not Financially ready for retirement • Their home equity was destroyed by recent financial crisis • 401ks were devastated when the stock market tanked Over 30 percent of U.S. investors currently in their sixties have more than 80% of their 401k invested in equities. So what happens if the stock market crashes again? • The combination of inflation and taxation significantly erodes retirement savings and income. • FACT BRIEFING: Boomers Generous to a Fault
FACT BRIEFING: Boomers Generous to a Fault • Findings from the Ameriprise Financial Money Across Generations® study. • three generations--parents of baby boomers, boomers themselves, and boomers’ adult children • http://www.ameriprise.com/global/docs/pr-fact-sheet-platform.pdf
Threat to Stock Market? • As Boomers retire, they will liquidize assets to create an income? • The wealthiest 10% of the boomers own 2/3 of the boomer’s financial assets • These people will not need to pull out assets to pay for retirement • Since they entered the workforce in 1971, the fund industry increased from $55 billion to $10.7 trillion. • 42% of that is invested in US Stock Funds
Best/Worse • Generation Y start replacing exiting boomers in the stock market • Current low interest rates slow shift • Largest portfolios concerned more with passing on wealth • Dramatically conservative asset allocation • Baby Boomers shift to income-oriented investments • The stock market’s long dry spell drags on
Life Expectancy • In 1935, it was 61.7 years old • Today, it is 78.8 years old • In 2050, it is projected to be 83.3 years old
Social Security • Government program • Helps those who are unable to work • Started in 1935 with the New Deal • Today, $ 192,560 • In 2050, $254,736
Social Security is underfund • The federal government has already begun to pay out more in Social Security benefits than they are taking in • 35% of Americans already over the age of 65 rely almost entirely on Social Security payments alone. • Approximately 3 out of 4 Americans start claiming Social Security the moment they are eligible at age 62.
Social Security is underfund • In 1950, each retiree's Social Security benefit was paid for by 16 U.S. workers. In 2010, each retiree's Social Security benefit is paid for by approximately 3.3 U.S. workers. By 2025, it is projected that will be approximately two U.S. workers for each retiree.
Conclusion • Baby Boomers are not financially ready for retirement • Social Security is underfunded • The Baby Boom will be leaving the workforce creating openings • Life expectancy and average years in retirement is constantly growing, putting even more strain on Social Security
How will this affect us? • Unemployment rate may decrease • Social Security will be strained and may not even exist as we grow older • Or… we may be required to pay even more money into Social Security • Since the Baby Boom is comprised of many of our parents, we may be required to support them since many are not financially ready