The silver tsunami.

Seen those swanky infomercials on late night TV featuring botoxed movie stars, washed up politicos, and flabby sports figures? They are pitching to the “Boomer blip.” For the next 20 years, Baby Boomers will swell the ranks of pensioners like water in a sponge.

Lots of candles, plenty of cake.

Baby Boomers, those born from 1946 to 1964, number about 78 million. The first turned 65 in 2011, and at present, more than 37 million are 65 or older (about 13% of the population). With roughly 10,000 joining the ranks every day, the U.S. Census Bureau estimates that this number will nearly double by 2030.

Thanks to improved health, mortality rates on insurers’ actuarial tables have been increased to as high as 120 years (see: The end of old). When NeXters sport a graying thatch and—OMG—finally think about retirement, many will still be celebrating birthdays with their parents.

In for the duration.

The fact is we are living longer—much longer. Seniors are living 50% longer than they were in the 1930s when Social Security set 65 as the benchmark retirement age. The Social Security Administration (2016) predicts that a man reaching age 65 today can expect to live, on average, until age 84; for a woman, age 87. But remember, the average life expectancy is just that—an average. By definition, half will live beyond these figures. Many people fail to recognize this and thus grossly underestimate their life expectancy.

Researchers at Northwestern Mutual Life Insurance (2013) tell us there is a 25% chance that a 65-year-old man will live to age 94, a 65-year-old woman to age 95, or at least one spouse of a 65-year-old couple to age 98. The bad news is that only 35% are projected to be financially prepared to live into their 90s. It’s no fun being old. It’s less fun being poor. It is hell being old and poor. Good news for cat food manufacturers, though.

An old age problem.

Many Baby Boomers will live longer in their retirement lives than they did their work lives. For NeXters, however, this could be the ultimate rocky horror show.

Health care. Rising medical and prescription drug costs and the limitations of Medicare make health care expenses a significant risk in retirement. The Employee Benefit Research Institute (2015) reports that a retired couple without employer-sponsored health insurance can expect to pay $392,000 for out-of-pocket health care costs like premiums and co-pays. Ouch!
Inheritance. For most people, the house they live in is their biggest retirement asset but their kids may be disappointed. Reverse mortgages are increasingly common as a means to finance retirement lifestyles, medical bills, and long-term care. And unlike their parents, two-thirds of Boomers say they plan to enjoy their lives by spending their savings and cashing in the equity in their homes.
Entitlements. Medicare and Social Security are “pay-as-you-go” programs funded out of payroll taxes. But the number of old coots (Boomers) drawing benefits is going up, while the number of young coots (NeXters) paying for them is going down. There are no good choices: reduce current benefits, increase taxes, inflate the currency, or reduce future benefits. Can you guess which ones politicians favor?
Investments. Stock market declines, taxes, and inflation can significantly reduce income and purchasing power, leaving retirees with less moolah to spend. When Boomers cash in their stocks en masse to pay for retirement-related expenses, portfolio valuations may plummet.
Employment. In a 2013 Merrill Lynch retirement study, 71% of pre-retirees said they expect to work during their retirement years. Oldsters in the workforce may present a roadblock to younger workers trying to move up to senior positions in their fields.

Who’s looking out for you?

Uncle Sugar? Nope. Nor any of his relatives at the state and local level (see: 30 dedicated years). Thanks to lobbying by AARP, a special interest group that represents people age 50 and over, this may be the “golden age” of benefits for retirees.* Although AARP has done much good for grandma and grandpa, many young persons worry how big their slice of the pie will be when they retire.

The big problem for Gen NeXt is it lacks political power. Describing itself as the “AARP for young people,” the Association of Young Americans (AYA) is a fledgling nonprofit that aims to represent Americans between 18 and 35 years old in policymaking. If you’re nowhere close to retirement at this point, your best bet is to save aggressively, invest wisely, and think of your Social Security benefits as an added bonus. Welcome to the new normal. Enjoy your weekend.