Retirement Planning for Boomers

January 1, 2011 marked yet another milestone for the Baby Boomers, the massive post-war generation born between 1946 and 1964. As of this New Year's Day, the first of the boomers turned 65, with an additional ten thousand becoming senior citizens every single day. As many have long observed, this will create pressures and challenges that will ripple throughout our society. Pensions, health care, housing and jobs are only a few of the areas that will be impacted by this outsized demographic shift.

At the same time, many among the youngest of the adult generations – Generation Y, or the Millennials – now find their career opportunities considerably more limited that their parents once did. Currently, adults from 18 to 24 years old are experiencing between 2-3 times the rate of unemployment as the rest of the working population. (Bureau of Labor Statistics, Nov. 2010) With the Great Recession and its glacially slow recovery likely to hold unemployment at these levels for at least several more years, the Millennials have a rough road ahead of them. And let us not forget, it's a road we all travel on together.

On this scale, stagnated careers and lost opportunities impact more than just the lives of individuals and their families. Federal, state and local tax revenues as well as Social Security and Medicare would all be affected by the resulting reduction in earnings. The inability for a large fraction of this demographic to participate in home ownership would also depress home values as demand withers relative to the supply. But perhaps most concerning is the potential for civil unrest.

Sociologists have often noted a strong correlation between high levels of unemployment among young adults, particularly young men, and the prevalence of war, gang activity and crime in general. Extreme disparities between different segments of society tend to lead to greater levels of discontent, particularly when that segment is disaffected youth. Given the high cost to society of such behavior, stepping up our investment in programs that facilitate education, re-training, job creation and placement would be money wisely spent.

Of course, technology is having a considerable impact on employment opportunities as well. Productivity gains due to computerization have been responsible for progressive job loss in some sectors for years. This is probably also one of the reasons employers have been slow to rehire during the current recovery. (Significant job growth has also resulted from the computer revolution. Whether this has led to a total net gain or net loss of jobs is beyond the scope of this post.) Computerized supply chain management, high-speed communications and other technology advances have made global capitalism possible and contributed to outsourcing, another reason for fewer jobs at the local level. Looking ahead, as systems become more intelligent and robotics become more adept, far more jobs are likely to disappear in the coming years.

It's important too to remember this is not an exclusively American phenomena. Today, Japan's young adults experience unemployment or underemployment at twice the national rate. In Europe, the disparity is even worse. A recent New York Times article on the lack of employment opportunities for young adults in southern Europe reported "an epic brain drain of college graduates" as they seek work elsewhere.

The economic balance of the world is shifting. The old powerhouses of the U.S., Europe and Japan are rapidly being outstripped by the BRICs (Brazil, Russia, India and China), with the CIVETS (Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa) and other acronyms coming up fast. In nature, systems tend to adjust according to differentials in potential and the same is true of nations and economies. If we're not careful, the confluence of demographic, technological and economic shifts could quickly lead to a future in which the Baby Boomers find themselves in a precarious and underfunded retirement.

Richard Yonck
Intelligent Future LLC
http://intelligent-future.com
Twitter: http://twitter.com/ryonck