Smart SpendingSmart Spending

Market plunge: Another bad turn for boomers

Investors in their 50s and 60s, still recovering from the 2008 crash, are taking it on the chin again.

By MSN Money Partner Aug 8, 2011 5:38PM

This post comes from Anna Prior and Alyssa Abkowitz at partner site SmartMoney.

 

SmartMoney.com on MSN MoneyFor baby boomers, it's got to feel like the worst kind of deja vu.

 

Last week's startling slide -- and today's even bigger Wall Street loss -- are just the latest dose of volatility to puncture their portfolios; not as wild as the 2008 crash -- at least not yet -- but just as sudden and unsettling. And it comes at a time when investors' 401k balances, on average, had only just returned to their pre-crash levels.

 

If the correction endures, advisers say, it'll be particularly tough for those who are close to retiring, or just recently did so.

 

"It's very unfair for boomers," says Ray Harrison, who heads up wealth advisory firm Harrison Financial Group in Roseville, Calif., which manages $240 million. Unlike investors under age 50 who still have plenty of time to build up their savings, he explains, boomers in their late 50s and 60s have relatively little time to adjust to losses.

 

"Those that just retired, wow -- they're hurting," says Harrison.

 

To prove it, SmartMoney asked the nonprofit Employee Benefit Research Institute to estimate what would happen to future retirees if bonds were to stay at their current, low yields, while equities rose at 6% a year, a more modest rate than historical averages. They found that 56% of late boomers, those approaching retirement age today, would be at risk of running short of money in retirement.

 

Some advisers who work with boomers think that the psychological toll of the market volatility has become as severe as the financial toll for that demographic. Post continues after video.

Steven Feys, a Poolesville, Md., adviser who oversees about $75 million, says that while his older clients, who can recall bad times like the stagflation of the 1970s, tend to take the long view and expect better times down the road, his boomers are more skeptical; after all, once you factor in the tech crash, in some cases "the market has been down half the time that they've been investing." For exactly that reason, Feys has been conservative over the past several weeks, moving his clients into cash.

 

Another option for gun-shy boomers who are near retirement, say experts, is buying an income-generating fixed annuity, which allows investors to turn over a lump sum in exchange for guaranteed income payments.

 

Those annuities have drawbacks, however: Because interest rates are low, the annuity payout rates are not especially generous right now, advisers say; and it's often expensive or even impossible for customers to cash out of fixed annuities if they change their minds.

 

For those and other reasons, investors should look to put a relatively small portion -- roughly 10% -- of their portfolio in an income annuity, says Drew Denning, vice president of retiree services at Principal Financial Group.

 

Of course, some bolder advisers continue to see the correction as a buying opportunity, urging boomer clients to confront their fears and seize the opportunity to pick up, say, retiree-friendly dividend paying stocks on the cheap. As for those who hoped to retire within the next, say, 12 to 18 months?

 

To quote a research note published last week by T. Rowe Price, "they already should be invested in cash or relatively stable investments." Here's hoping they made that move before Thursday's 500-point drop.

 

More on SmartMoney and MSN Money:

44Comments
Aug 9, 2011 8:35AM
avatar
I am a baby boomer who did what was supposed to be the right thing: went to college, got married, worked hard, saved and invested, raised responsible children. Then: my work  hours got cut, pay got cut, had a MAJOR surgery that has left me unable to do many things, the company my husband worked for went bankrupt leaving us no medical coverage. The company also cut out the $150k life insurance that would have protected me in case of husband's death. Our savings and investments got hit in 2000, 2008, and now - even though we were fully diversified.  Two adult children needing financial help due to unemployment despite education, and responsible personalities. Elderly parents needing help. House is worth $80K less than we paid for it. Now they're talking about cutting Social Security and Medicare.  After a life of work we will have very little. 
Aug 9, 2011 7:05AM
avatar
401Ks are a baby boomers "experiment" The idea was to let people put money in, driving investments in the stock market. Then, when the 401ks are fat Wall Street has a crash and excess money is not lost but transferred into the hands of  the few. Much like a one would shear a sheep. So don't blame the boomers they tried to finance their own retirements, to make life better for their children. Their dreams were stolen from them.
Aug 9, 2011 12:09PM
avatar
I am a 63 year old "boomer" and I'll just toss in my 2 cents worth here. It's not just the boomers, but every generation that has followed them who has lost out over the past several decades. Having worked a full time job for the past 50 years while raising a family, sending kids to school, helping out other family members in need, aging parents, and all the other things that went into simply living life has been a long, sometimes hard, sometimes fun, adventure. The reason that I say all the generations are losers is quite simple. Over the course of this adventure I have watched a continual degradation in our value system, work ethic, quality of elected officials (primarily congressional) along with a corresponding escalation in money driven greed that has come at the expense of the first list of items mentioned. Until every American of voting age accepts the responsibility and duty that is gifted to them by being an American citizen by becoming an informed, active  voting citizen that participates in the guidance of their country by electing a better quality of leadership rather than the current self-serving, irresponsible, do nothing, know nothing, "holier than thou" we can expect nothing other than the disjointed, disconnectedness that we have at present. I've listened to all of the accusations flying back and forth about the raising of the debt ceiling, who caused it, why it needed to happen, why it shouldn't have happened, etc. "The Tea Party this, the Dem's that, those Republican's, yada, yada,.yada. My response...it's not any one of them, it's ALL of them, and it's our own fault...we put them there and we allowed them to stay. I have become increasingly convinced that the answer lies with WE THE PEOPLE, those who these officials are elected to office to serve, not the other way around. A balanced budget amendment and term limits might be an excellent way to start this process of taking back OUR country. In regard to an earlier comment about the Social Security..."a filing cabinet full of IOU's"...I have a somewhat different viewpoint. Officially titled the Social Security Trust, I view it more as grand larceny since the funds were stolen by our very government for purposes other than they were ever intended to be used for. Had the fox not been appointed to watch over the hen house, and had the fox(es) not eaten all the chickens we would all still have eggs aplenty!

I'll get off my soapbox now and thanks for listening. 
Aug 9, 2011 11:29AM
avatar

Just yesterday I saw on the news that American government is giving 5 billion to starving kids in Africa and the government is telling us the working and retired people of America that the government can’t keep social security going, then why are they giving 5 billion to starving kids in Africa so there’re starving retirees and disabled, and unemployed in America!?

Aug 9, 2011 11:17AM
avatar
You would think the brain dead in Washington would figure out until the boomers are comfortable again this economy is going to continue to be in the tank. Other than the ultra rich, to whom it does not really matter, the biggest buying power still lies with this generation.
Aug 9, 2011 12:25PM
avatar
Travis Pullen and all of you others who seem to think that the entire baby-boomer generation has controlled "every facet of government," get a clue!  There is ONLY a subset of the entire boomer generation in government, and I don't like them anymore than you do. 

Perhaps there are some people from your generation in government.  Therefore, all of your generation is to blame for where we now stand.  Maybe your children should curse you as you are cursing us. 

This is NOT a generational thing.  We are all suffering.  How would you like to lose your job one year before you retire and find yourself with no work because no one will hire your old a$$ and you have no money and no health insurance?  That is the spot my friend is in.  Don't want us to collect the Social Security that we are entitled to because WE PAID INTO IT, along with our employers' matching funds for 40 to 50 years?  Maybe you would prefer that we have no retirement money, so we stay and work while your generation goes jobless.  Maybe you'd prefer that we stay and work while seated in the manager's chair so that you never get your promotion.  THINK ABOUT IT!  Our generation paid our parents' SS, so we expect you to pay ours, just like you will expect your children's generation to do the same.  That's how this Ponzi scheme works.  I don't like it, but that is what the b*st*rds in Washington devised 75 years ago.  Why don't you curse that generation too?  I'm sure that you will be willing to give up every penny that you paid into Social Security when it is your turn to retire. NOT!

Damn these politicians and the corporations who own them!  Due to their irresponsibility, they have us hating each other.  And that is exactly what they want.

Aug 9, 2011 12:57PM
avatar

I am a boomer...

- I worked starting at age 14 (golf caddy & paper delivery)

- I had to pay my own college (I worked vs. student loans)

- at age 24 I bought my 1st house with 20% down --- the mortgage amount of 50K scared the crap out of me so I made double payments (my furniture was limited to some used lawn furniture for the living room, card table for the dining set, 15" black & white tv, no air conditioning, etc.  My car was paid in cash.

- by age 30 I had no debt at all --- and was saving approximately 20% of my income

 

I do not think I caused this problem...

Aug 9, 2011 12:57PM
avatar

bookworm1949, I hear you. 

Boomers are not evil.  We bought into the lies our politicians fed us.  We bought into the lies the companies we worked for fed us.  We believed that if we busted our butts... if we worked hard and saved hard and bought into the American Dream we would be rewarded. We got taken.  Over the years our politicians have progressively forgotten who and what they are working for. They have used our government to advance their own agendas for their own profit.  They have snuggled up to the big corporations in exchange for big buck donations to keep them in office, cushy jobs after they get out of office, and profits for companies they are attached to (for example, former VP Cheney).  Corporations have decided that mega profits trump doing right by the people who work for them and help them make those profits.  The CEOs and CFOs and all the rest of the boys making the big bucks at the top keep grabbing.  They don't care if the economy tanks because they have enough money to live well, with or without a job.  It's the rest of us that suffer. The only way we the people have a chance is the break the bonds between politicians and corporations.  Outlaw lobbyists.  Severely restrict campaign contributions, especially from companies and groups.   Otherwise things are just going to keep on the way they have been.   

avatar

.

Just another typical scam by the big money boys.

 

They lure the small investor into the stock market then stage a sell off that wipes out the small guy.

 

Remember someone with big bucks is buying up all the stocks being sold cheap.

 

What this does is keep the small fish working hard and long to recover their losses.  If you cannot afford to retire, you cannot start drawing down that company pension!

.

Aug 9, 2011 12:15PM
avatar
What people need to realize is that the Stock Market is a form of gambling and no where is it written that you will always win.  Just like going to Vegas you may win a few bucks but in the end the "house" usually gets back the money. It's just that simple and if you don't have the stomach for it you should put your money in far less riskier investments like a CD where you won't lose money & you may make a few peanuts.
Aug 9, 2011 11:42AM
avatar
If this so called President spent his first 2 years on the economy, instead of health care, maybe this wouldn't have happened, and the job market would have improved. The country is being run by a leader who doesn't lead, and who's priorities are all screwed up. For he sake of the country he has to be a 1 term President.
Aug 9, 2011 1:08PM
avatar

Wow a lot of negative comments on the Boomer generation.

I'm 64 hopefully will retire at 66-and what have I accomplished?

Military 20 years retired.  Getting my military pension and saving it.

College educated 2 degrees, an RN.

Have saved over the years through my 401K (Gasp!  Yes I saved). 

Upon retirement hopefully- 2 pensions (one military one civilian);  apply for Social Security and Medicare;  withdraw 4% from my savings account per year.

Published author, like to write fiction.

Other hobbies and interests.  Not bored.

Note - while many were bailing  from the US I faced the Vietnam conflict head on and eventually became a commissioned officer and stayed in the military.

 

Paid taxes all these years and tried to do the right thing.

So I really don't want to hear anymore negative comments.  All generations have good and bad apples. 

Aug 9, 2011 1:05PM
avatar

A lot of the "Baby Boomers" as you call them fought in Vietnam and paid the ultimate price there with their lives. They deserve whatever social security and benefits they can get.

 

Speaking of over extending, generation X, Y, Z or whatever it is now have to have all the Apple I-phones, I-pads and a Lexus or Cadillac to feel good about themselves.

 

Nowadays some kid puts a hat on sideways, hangs his jeans down over his butt, thinks he's a musician and can RAP and you idiots buy a million records or downloads so he can drive a luxury car, live in a McMansion living the good life, if he doesn't OD on drugs, gets his girlfriend knocked up and then kicks her out on the street for the next one in line. The current generation is the generation of EXCESS!

Aug 9, 2011 1:46PM
avatar

To all the critics of the baby boomers

 

I lost my mother at age 9

I started working at age 16

At 19 I was sent to vietnam

I payed for my own college thru the GI bill

I have worked all my life,I drive a toyota

dose that sound like i am spoiled,now i sit and watch as the wealthy politicians in washington destroy my retirement  thru their greed

 

almost every American has had to take some kind of reduction in pay or benefits except our politicians. I think all elected officials should also take the same cuts .I know this will not  save   much but at least our confidence  could be restored. more likely they will not even consider this. The tea party politicians have the best medical plan in the world,dose it make you wonder why they want to deny the same to the rest of us.

 

 

Aug 9, 2011 12:16PM
avatar

When are people ever going to wise up - stop investing in 401Ks, stock markets, etc., if you don't have a single clue what you're doing!  Keep it simple in a savings account(s).  I'm always amazed at how people start complaining and pointing the finger at the government, Wall Street, etc.  They did not hold a gun to your heads to put your money in these ventures, did they?

Aug 9, 2011 12:15PM
avatar
It's like we're all playing a grand game of Monopoly with a cheat in control of the 'bank'.
They are giving Americans a grand fleecing!

Of course, this is just my opinion; I could be wrong.

Aug 9, 2011 2:20PM
avatar
I worked hard in school, and also started into the job market at the age of 14 years loading, and unloading trucks in the local produce market! I went into the U.S. Army to serve my country in 1971. I got out in the mid-70s to a VERY bad job market. I went to college on the G.I. Bill, working in a band, and odd jobs. Got a job through being persistent, got married and bought a house in the early '80s. Raised two beautiful daughters. Now, I have to read about this crap from these idiots, and watch as the unenlightened criticize the Baby Boomers, who fought, worked, and kept you safe. You are welcome.
Aug 9, 2011 11:59AM
avatar
To Rickone.. Our government is giving 5 bil to starving kids and billions to other countries  because if they do this, the receiving government (persons) which whom the deal ismade will in turn promises to contributes to large amounts to the giver's reelection campaign - For example "give us 5 billion "for our starving people" and we will contribute "5 million" to your reelection campaign !
Aug 9, 2011 12:33PM
avatar

The politicians are baby boomers the CEO of banks are baby boomers. The baby boomers bought houses and 2nd houses, vacation homes, tore good houses down to make their McMansions or took second mortgages out to add on to existing ones they couldn't afford. All this debt, debt, debt and no real money. Got to have BMW's Mercedes, Porsche, Lexus and send your kid to Best University $$$$$$. Everything on debt, debt, debt. Another words all this spending was phony money just for the love of material goods and at the expense of others when it all came crashing down.

Doesn't anyone every have a thought that if you have to get a loan for everything you do that it means you don't have enough money (so you can't have it)? Is this money going to all of a sudden appear as you borrow more and more money as you go deeper and deeper into debt? The pied piper is going to come calling someday and as usual others are going to have to pay for it in many ways.

Aug 9, 2011 1:22PM
avatar

for983 your assessment is flawed- I have kept debt low and lived within my means.  Right now I have a zero balance on my 2 credit cards.  Never had a BMW or Mercedes. 

Your speculation is quite wild and inaccurate.

Threekinks- takers?  Myself I don't consider myself as a taker-served in the military 20 years;  an RN thus in a giving profession.  Please reconsider before making blanket statements which are not accurate.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More