Scary Figures..... So what's the real cause of this coming financial crisis? BABY BOOMERS. If you were born between 1946-1964, then you're one of them. Of course, I'm not suggesting that you as an individual are the cause of this crisis but rather, the entire generation is. Let me explain You see, Baby Boomers that were born after World War II in the US have been defining the course of consumer history for over the past 50 years. Here are several examples: In the late 1940s and 1950s, sales of baby foods, children's clothes and toys skyrocketed as the Baby Boomers enjoyed their childhood years Then, throughout the 1960s and 1970s, automobile sales spiked as Baby Boomers started driving and entered the workforce Throughout the 1980s, Baby Boomers were buying their first homes which started the trend of suburban sprawl in larger cities In the 1990s, Baby Boomers enjoyed their peak earning years, ramping up their investments during the boom spending and spending en masse on luxury goods As the Baby Boomers realized that they will most likely live longer than their parents in the 2000s, they invested even more of their income because of a planned extended retirement, and spent much of their disposable income on health and beauty products and services As you can see, this generation has dramatically impacted consumer markets and spending in a positive way. However, now they're about to affect the entire financial system but in a negative way. Today, the oldest members of the Baby Boomer generation are turning 65, and are starting to draw on their retirement funds. The ball has been set in motion. So let me show you what's about to happen This scenario is quite scary, and to explain it involves some numbers (all of which you can verify yourself) but I'll keep them very simple for explanation purposes - There are approximately 79 million Baby Boomers that were born between 1946 and 1964. This means that, on average, 4.3 million of them will retire each year for the next 18 years. - So, for argument's sake if 4.3 million Baby Boomers retire each year, that averages to 358,333 of them turning 65 each and every month for the next 18 years. - If each of those 358,333 retirees withdraw just $1,500 (which is a very conservative amount) from their retirement fund by selling shares of their stocks or mutual funds to supplement their Social Security benefits and/or pensions then each month, approximately $537,499,500 (over a half-billion dollars in stock and mutual fund shares) will be sold in the markets. But this scenario gets much much worse. You see, each month, with another 358,333 Baby Boomers retiring another $537,499,500 in stock and mutual fund shares gets added to the previous total and sold off in the markets. And as you're probably aware, when more shares are being sold than bought the prices plummet. It's a simple case of supply and demand. And as a direct effect, people's retirement portfolios will drop across the board. Notice I didn't say, "may drop." I said, "will drop." So here's how this could start playing out, starting in February 2012, if not sooner
And in other news the sky is blue. You will also see another drop in house prices becuase enough of them will be selling their investment opertunites.
That's all good and well.... but how many people enter the work force each year/month? And start paying into investment funds?
Government can increase employer contribution percentage, which will pick up some of the slack.. and like RM said above, there is always new people entering the workforce (or leaving in bad economy )
4. The Ageing Population The last decade began with the Baby Boomers ranging in age from the mid 30's to early 50's and it concludes with some of the Boomers entering retirement and becoming pensioners. This is the start of the age wave hitting Australia. By the end of this decade (2020) there will be more 65 year olds than 1 year olds. In 2020 life expectancy at birth will exceed 81 for a male and 86 for a female, and almost 1 in 5 Australians will be aged over 60. Over the next 4 decades while the total population will increase by just over half, the 65 and over population will more than double and the 85 and over population will triple. This ageing population will affect everything from the national accounts, to demands on health and housing, to the workforce. In 2020 the never-grow-old Baby Boomers will be in their 60's and 70's, and the oldest Gen Xers will be in their 50's- and themselves beginning to exit from the labour force. http://www.probonoaustralia.com.au/news/2010/01/top-10-trends-new-decade-2010-2020
And employers can cut staff hours and lay people off if they do. You can only bleed employers so much before they simply fold or move offshore. If the super contribution is to be increased the balance needs to come from the employee's pay packet, not from the employer.
Just raise the retirement age, looks like it will go up to 66 anyway, not so bad for the guys, an extra year but a bit of a kick in the teeth for the ladies. retire at 75 anyone?
And that's probably going to require hefty tax increases and/or significant amounts of immigration. Which is also why you get silly things like the baby bonus. Problem with the pension scheme is that it was always a pyramid scheme. It's OK while you've got more people coming in the bottom, but after that...
Is this just for the state pension or will voluntary contributions (defined benifit fund etc.) also get held out to 67?
Consider that we have a government, which for all intent and purpose is either broke, or so close to it. What do you think they will do?
That is why we need to make our own super fund IMHO and it means sacrificing each and every day to make sure that we don't rely on the gubbermint. Young people in Burma, that will be one solution one day, so I need to control my own financial destiny!
I had a similar discussion on here a week or two back. I was pounced upon by a couple key RE permabulls for mentioning what's being discussed here. Yet, no hide nor hair to be seen here... Interesting.
You lost me. Why is it so much worse for ladies? They already get to retire earlier than men in some circumstances and live longer to boot...
