Many of the best-laid financial retirement plans in America—of which real estate was a crucial part—now lay in ruins. Ask baby boomers what has happened to their planned twilight years in the land of milk and money and many will tell you they took out home equity loans to use a part of their new mortgage or for home improvements on their planned retirement home in AZ of FL. They purchased at $300,000 and now it’s worth $120,000. This end result means many have foreclosed on their planned retirement home but are still paying of the higher interest bank home equity home. The outcome will for these baby boomers is they’ve had to realign there financial life and some have lost all hope of ever reaching their retirement goal. Even if the property market rebounds 15 years down the road the financial damage they have now incurred is beyond repair. The majority live in devalued homes, reviewing their shredded retirement plans as they try not to hyperventilate because their health insurance no longer covers that condition. It has became very clear that in order to retire at sixty-five, many either need to win the lotto or within the next five to ten years earn what they did in their last thirty—almost an impossibility. Most know their prime earning and saving years are over and despair that their personal savings are scant and the American dream they once had has officially expired[i].
Is this important? Yes, it is, because how the baby boomer generation sees out its remaining years will be a good indicator of what happens to “Generation Jones and Gen X” behind them[ii]. At sixty-five, retirement may longer be a realistic option and if they are unemployed now with few job opportunities, what chance do they have ever seeing out their twilight years while earning a supplemental survival paycheck?
The stark reality for the generations behind the baby boomers—Generation X, Y, and Z in the popular vernacular—is that their American dream, which also included their home, is close to expiration. Why? Because Americans now live under a slow-moving and devastating five-front perfect storm[iii] and these are eradicating the American dream for millions of Americans.
- Front 1: Despite all the hype on the so called job recovery. The real unemployment and the demoralizing endless new job search is at an all-time high, with no real long term improvement in sight for the long-term unemployed.
- Front 2: An unprecedented one in four Americans is underwater on their mortgage[iv].
- Front 3: The country’s health-care “system” is currently the largest cause of personal bankruptcies, with no change on the horizon[v].
- Front 4: Educational costs are already out of reach for the average-income family, and seventeen million Americans with degrees now have jobs that require less skill level than is associated with a bachelor’s degree[vi].
- Front 5: Our the cost of living is dictated by the price of a barrel of oil. In 2008 and 2011, we felt the impact a $100 plus a barrel of oil which gave us $6 a gallon. In increased our cost of living and reduced our disposable income. What happens when this becomes a permanent price feature? Large-scale “supermarket inflation” is already happening and incomes are not keeping pace with today’s rate of inflation and in many cases individuals are forced to look for a second job to make ends meet. This further overpopulates an already depleted job market.
Currently, 1.8 million bank-owned homes have yet to be listed, 33 percent of Americans know someone in foreclosure, 49 percent of renters pay more than they can afford and 26 percent of all renters spend over 50 percent of their pre-tax income on rent. Staggering though these statistics are, those in power are still talking about recovery and refusing to acknowledge these economic alarm bells[vii]. I can’t wait to see what the recovery will look like based on these statistics.
Mortgage debt, high unemployment, and a health-care system that only covers what one can afford to pay it are the tidal waves obliterating the middle and lower classes. The King really is in the altogether, yet we still all cheer and wave on the sidelines as if nothing is happening.
[i] http://endoftheamericandream.com/archives/in-2011-the-baby-boomers-start-to-turn-65-16-statistics-about-the-coming-retirement-crisis-that-will-drop-your-jaw
[ii] http://en.wikipedia.org/wiki/Generation.
[iii] A perfect storm is an expression that describes an event where a rare combination of circumstances will aggravate a situation drastically.
[iv] http://blogs.wsj.com/developments/2010/02/23/nearly-one-in-four-borrowers-underwater-on-mortgage/
[v] http://voices.washingtonpost.com/health-care-reform/2009/06/new_study_shows_medical_bills.html
[vi] http://chronicle.com/blogs/innovations/why-did-17-million-students-go-to-college/27634
[vii] http://www.usatoday.com/money/economy/housing/2011-03-30-distressed-homes-shadow-inventory.htm
Jerry says:
That a great article, and my elder brother who has just retired now finds that his medical costs are no longer covered and he is spending what little he had saved to still get his meds.
Doug Barns says:
You post rings very true to me and my wife. We are in our mid 50s and a 4 years ago we both lost our jobs. We have been unable to find full time jobs and work at what ever part time job we can find. My wives works medical insurance used to cover all of her costs and now we are on our own, no insurance company wants to cover us. So this is an additional cost of $1,200 a month we have to pay to cover her medication costs. We are now behind on our mortgage on a home that is underwater. I can’t see a way out for us unless we get full time jobs, which at our age is clearly not going to happen. Please do not think we feel sorry for ourselves as we do not. I know I am one on millions in this situation but what amazes me is why the media do not cover our plight. Thank you for making an effort to put these issues into the public domain.
Anna says:
You have summed up the future of millions Americans very well. I hope many take note and do something positive to change their future. I just came back from Europe and at $8 to $9 a gallon there it does not take a lot of thought to see what will happen in America when we are paying the same. As for medical insurance and all of it costs…..don’t get me started on that. It is just one big expensive rip off…..RIP being for those who can’t afford it.
Jeff Bergstrom says:
The job recovery is here. No one likes it, but in 10 years you will dream of 8% unemployment. There is no end in sight and the culture is woefully unprepared for the future that is coming. For decades technology advances have meant doing more with having less. This coupled with our need to continually grow means at some point we simply don’t need as many jobs per capita as we used to. It will only get worse.
Medical costs are a mess. All the talk of getting a handle on health care costs and not a single discussion about changing the way our Insurance industry operates. Aside from guns, is there a stronger lobby group?
Our thinking of education hasn’t changed much in decades. In the future higher education will have a significant online componet. Even with today’s distance learning technologies, it makes no sense to move to a distant town, rent an apartment, pay a ton of expenses etc, etc, just so you can sit in a cinderblock room and listen to a professor. Why can’t 10,000 students attend Harvard’s History 101. Look at 4 year olds today. They are taking to tablet computers like fish to water. By the time our 4 years olds get to college age, technologies will advance to the point of seamless distance learning. So, I really think education will work itself out.
Reluctant says:
Thanks Jeff, great comments and I agree the insurance and medical lobbies are all powerfull. My medical insurance has increased by 30% in 2 years and I now have less coverage….go figure!! It will be interesting to see how eductation looks in 10 years from now. Best TRR.