What happened to our net worth?

From Assets to Liability: Are the Boomers now a burden on our government?

What happened?

How did the most monitored, tracked and watched generation go from the government’s and country’s largest asset base to being on the verge of becoming the greatest liability the nation will have? This is the same generation who from the time they were born has participated in so many changes in our society. From birth through what is now viewed as retirement, this generation has followed paths of investment and asset accumulation recommended by various administrations and financial institutions. Now, as they approach retirement, their savings and assets have been wiped out. They are now faced with decisions on how they will live out the remainder of their years with some dignity.

Unlike their parents, “the Greatest Generation”, the boomers, or “the ‘B” Generation (do they want to carry the moniker of baby?) is facing financial disaster. True, the greatest generation faced the Great Depression and then the Second World War. However, they were in their early 20’s when these events happened and they had time to recover. How much more resilient are you at 20 than you are at 60? So the boomers, who grew up with their parents migrating to the suburbs, followed in the same tradition. They first saw a home as a home, then as an investment. They purchased homes when prices were reasonable and had the appropriate credit checks done prior to purchase. They paid their debt and were rewarded with a decline in housing values.

Change is the buzz word of today. And yes, the boomers were the generation of change. Change was clearly the boomers mantra. After all it is this generation that gave the world Woodstock, Watergate, Sexual Revolution and Civil Rights. Now boomers have been handed an economic crisis that threatens whatever prosperity they have earned. Due to reasons yet not understood, they want for the information explaining “why aren’t we doing better?” This generation resisted the Vietnam War, demanded change after Watergate, and invested in 401ks because they were told it would ensure their financial security. This same generation now wants, no needs, to exert its force once again to get back the standard of living it earned.

Once the dust settled and the boomers got through sewing their wild oats, they went to work. They worked in the financial industry, in the fields, in the factories. They paid their taxes. The taxes they paid went into government and local programs, to support the current and future generations. These taxes they paid have long been allocated and spent. They financed Social Security, Medicare, Medicaid, and a slew of other entitlement programs meant to promote socio economic equality. More important it was these taxes that became the financing vehicle enabling economic equality. The government warned the boomers that social security was not enough. That government encouraged savings first through IRAs, then 401Ks, then a multitude of programs encouraging personal responsibility in order to reduce retirement liability. Companies were built around this wealth accumulation. In fact, some even had the audacity to call them” wealth accumulation programs”. Money was handed over to firms, and portfolio and money managers bloomed. But did it help boomers achieve their goal of financial security?

The boomers continued to work accumulating funds to offset the high cost of education for their children. Having been warned that their children would not live as well as they did, the boomers responded. The boomers responded strongly by making sure their children did in fact live a better life. They did this by working hard and saving through it all.

As this wealth was being accumulated, the boomers stayed in the work force. As health care costs sky rocketed, boomers remained on the job for benefits. After all, there were very few alternatives to medical coverage other than employer supported programs. Even these benefits dwindled in time. Employee contributions increased and companies cut back on benefits, yet this still remained the best alternative to health care. After all, the job insured the boomers some sort of benefit coverage. Sometimes the goal was to work until they reached Medicare eligibility in order to have continuous coverage.

So the boomers worked diligently through national crises after crises: Savings and Loan failures, runaway interest rates, defense spending, and wars. The boomers fought so hard to remind a nation of past failures, yet kept working and saving.In the end the boomers prepared for retirement. They saved for their sunset years and prepared to cash out over time. Their houses had theoretically increased in value and the money was “safe” in the banks.

Then it happened, the crash or the financial meltdown of 2008/09. Now had their ‘wealth “ disappeared? More importantly, what will happen going forward? The government talked of stimulus packages, but a couple of hundred dollars per individual could not make up the devaluation of each individual. What will be the government’s or society’s responsibility to this segment of the population? Ours is not a society that prepares for the keep of their seniors. In fact, over the past 65 years, this group has been told numerous times to prepare themselves for their senior years.

How can you prepare? How do you take matters into your own hands? How do you recover any of the lost wealth? These are questions that the boomers have got to start answering now. The generations that followed the boomers, X's or Y's, do not have the boomers in their site. They are preoccupied with their own issues. They are starting to feel the effects of the boomers’ deflated wealth in as much as grandchildren aren’t going to get the same rewards their own parents got from the boomers. Yes, the Babies r Us will survive, but the amount of disposable income will get less.

So what is the next move? Clearly the changing financial environment is starting to tell the boomers that it’s time to take their life into their own hands. They have to do their own planning. To date, the planning that has been done by the government and financial world has taken them down a path of possible disaster. This disaster is looming on an individual basis as well as at a society level. What programs are in front of the current group of legislature? Will these programs “insure” the generation that has supported this country through 40 plus years of work and taxes or will this government wait until it’s too late and the senior citizens are pushed aside and eventually become a liability to a new working class? Will this liability be such that social and financial programs will not be supported by the “me generation”? What happens then? Picture this, instead of 20- somethings standing on food and shelter lines as in the 30’s, we could have a much older group repeating this process. Their endurance will be far less than the “greatest generation”, and as a result, there could be a collapse of family and organization structures . So many questions are on the horizon for the boomers. Although well educated and instrumental in creating the culture that has become America, will it be too late to recover their financial wealth, homes, jobs, and health care? Or is it just too late and will they be put out to pasture?