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Caught In The Middle

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Although Im an inveterate optimist, I am beginning to feel some nervousness about the future for a large swath of this countrys population.

This is not due to certainties such as that global warming will advance even more quickly than anticipated or that this country will launch another preemptive war. No, what is making me nervous is that a large portion of the biggest generation in historysome 76 million baby boomersis hurtling toward retirement largely unprepared at a time when the ground rules are changing literally under their feet.

Indeed, whats happening is the equivalent of a fault line in an earthquake-prone area. What it is, in a word, is that boomers are in that transition generation where many of them once had security through guarantees in pension plans and health insurance, but now are being driven to take responsibility for these themselves.

Many of them dont seem to be ready to accept this responsibility because of lack of preparation or because of a hunger to hold on to the comforts of the past when those comforts no longer exist. They are stuck in the guarantees of yesteryear at a time when those guarantees have gone up in smoke.

Do you know many boomers who have defined benefit plans anymore? No, I didnt think so. The responsibility has been transferred to the employee and self-directed funds are supposed to be the answer to having enough money to last through what is likely to be a much longer retirement than anticipated.

Yes, the tools for teaching are out there, but surveys have shown that many boomers still dont have a clue. Many still believe that a ridiculously small amount of savings is going to last them through a retirement that could stretch for 30 years. Many still harbor hopes that the government will ride in like the cavalry and save the day when this seems increasingly unlikely. They may wake upperhaps as theyre opening another can of cat food for dinnerbut by that time it will be too late.

This is scary enough, but a similar trend is also starting to percolate in the area of health care as the so-called consumer-driven health plans begin to burgeon. Although they are being hailed as the answer to our health care and insurance problems, I think boomers will be even more at sea here than in the realm of providing for their own financial security. For a generation that was raised on health insurance guarantees, the prospect of self-directed health care is likely to be a mighty scary one.

Why do I single out the baby boomer generation? The answer is simple. Seniors in most cases still have their guarantees. Many are receiving their defined benefits, their full Social Security benefits, Medicare, etc. Theyre in pretty good shape.

Generation Xers and those younger, on the other hand, will likely never know a defined benefit plan and will grow up in a world of self-direction insofar as retirement funding and health care choices. No confusion, no fruitless longing for the past. You cant mourn the loss of what you never had.

Boomers, however, were raised and have worked in an environment where security was the watchword. Now, as they are approaching their much longed-for retirement, they are being confronted not with security, but unpredictableness; not guarantees, but variables.

Is anyone in the insurance business surprised that in the face of this craving for security that products with guarantees have been all the rage in the last few years? In the Clinton bull market of the late 90s, everyone was a good investor. Now, however, as people sit counting their losses, theyre much less sure.

Were all heading unavoidably into the future, but its unsettling when millions of people are doing it facing the past.

Steve Piontek


Reproduced from National Underwriter Edition, September 9, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.