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.
[iii] A perfect storm is an expression that describes an event where a rare combination of circumstances will aggravate a situation drastically.