‘Interesting Times’ Ahead

With a multitude of tensions between dreams and reality, the years spent in retirement may just turn out to be the most interesting part of the lives of the baby boomer generation.

Of course, we mean ‘interesting’ in the Chinese fortune cookie interpretation of that cocktail party word, made famous in the exhortation “May you live in interesting times.”

The main factor in the anticipated tension in the boomers’ golden years is, needless to say, money, or rather, the lack of a sufficient amount of it. Maybe we should start calling them “the gold-plated years” now so that when they finally roll around it will be less of a shock for everyone.

Among the factors accounting for money headaches in the future are the hurly-burly rush into indebtedness now as retirement nears, the gratification of present desires that creates a pitiful amount of saving for the future, killer tuition bills for boomers who had their kids late in life, etc., etc.

No wonder that more boomers are looking favorably at phasing in retirement as opposed to calling it quits to working at 65, 66 or 67.

Of course, many people are thinking about continuing to work in their “retirement” years because they really like the work they’re doing or they finally have that chance to make the career change they couldn’t before or they think they’re going to be bored out their minds with all that time on their hands. After all, how much golf can one human being play?

But because boomers are among the great rationalizers of all time and are certainly ‘the greatest generation’ in this regard, it’s likely that their manifold money problems will be transmuted–with barely one inward glance–into a desire to really wanting to prolong the work experience.

The piling up of debt is troubling, particularly in terms of mortgages. The meteoric rise of exotic mortgages in the last couple of years is downright scary, especially the variety known as interest-only mortgages. These seem to be flourishing in areas where housing prices are literally going through the roof and are being taken out by folks who would otherwise not be able to afford the payments.

Yet the bill is coming due. According to an analysis by Deutsche Bank, in 2007 about 12% of the nation’s mortgage debt, or about $1 trillion, will switch to adjustable rates. Payments will soar from their initially low rates. At that point, a new term may have to be invented for a situation where you get “sticker shock” way after the date you purchased something.

Another scary factor and one that is given scant attention is the cost of health care in retirement as shown in Allison Bell’s story on page 41. There are all kinds of things that Medicare doesn’t cover and the cash for these is going to have to come from somewhere. The thinking at Fidelity is that these costs could amount to $190,000 over the course of a couple’s retirement.

Boomers might want to work after their retirement age just to get a bit of supplemental health coverage, if these projections come true.

It’s true that great swaths of the boomer cohort are in denial about nearly everything. But advisors and insurers know differently and therein lies the great opportunity.

Advisors can break through denial one thump at a time and insurers already are beginning to address all kinds of longevity issues, including retirees continuing to work and what that means for insurance products.

There are some who think the statement “May you live in interesting times” was actually a curse. In the role of a lifetime, the industry has the chance to be Dumbledore to a whole generation of Harry Potters.

Steve Piontek

Editor-in-Chief

‘Among the factors accounting for money headaches in the future are the hurly-burly rush into indebtedness now as retirement nears, the gratification of present desires that creates a pitiful amount of saving for the future, killer tuition bills for boomers who had their kids late in life, etc., etc.