Why MANY Baby Boomers are in Financial Trouble | Is This You? #Finance

in this CashNews.co we discuss nine reasons why many in the baby boomer generation may be in financial trouble coming up next on holy Schmidt holy schmit we’re going to run through this very quickly because there’s a lot to cover here and frankly it’s all very very

important but before we do make sure you give the CashNews.co a like this helps the YouTube algorithm raise the CashNews.co and the search results and I want to help as many people as possible all right let’s go number one is longevity risk let me start off with a little party trick that you

can use that will Amaze friends and strangers alike who first said I’ve got some good news and I’ve got some bad news no it wasn’t Alec Baldwin in the 1992 movie Glen Gary Glenn Ross although that’s frankly where I first heard it the real answer is a gentleman by the name of

Herman Kerner in his 1898 book beleaguered so let’s lead with this I’ve got some good news and that is in 2020 before as you approach retirement or even are in retirement you’re more than likely to live 20% longer than your 1960 self getting ready to go into retirement at that

time the bad news is that you now have to figure out how to pay for it because people in 1960 didn’t have to worry about extreme longevity risk at least not to the extent that they do today the biggest problem of all is that no one growing up actually knows what it’s like to be older

and and because of that they don’t plan properly they think that they’ll always be youthful until the end this by the way is what Peter AA calls his health span concept meaning that growing up we all think that we’re going to be able to do the things we can do today even if

we’re not required to do them anymore including work for instance but that actually isn’t the case in late stage retirement next baby boomers are sometimes now called the sandwich generation this is the generation that cares for both their aging parent parents and their adult children

financially the same medical technology that has increased your lifespan the one we talked about just a minute ago has also done the same for many of your parents this means that they’re living longer and hopefully they have a long Health span but frankly many do not and this is where things

get costly on the flip side the requirements for success for our children has gone way up I don’t know about you but when I was 19 years old I moved out and never moved back in again I went to night school and worked during the day to pay for my college I then put myself through graduate

school at the Kellog business school and moved here to New York with my wife and my one-year-old child to start a career in banking today there are more safety nets and children are taking longer probably not a bad thing but it does impose a financial obligation on adults and retirees frankly that

may not have existed 30 years ago so on one end your parents are living longer and on the other your children are on the payroll longer so to speak next Social Security is somewhat inadequate today much more so than it ever has been in the past let me explain Social Security is under pressure due

to stagnant growth in the workforce historically the number of workers per retiree was much larger than it is today so the funding is getting depleted the actuaries know this and the SSA and the government has made small changes that have had a big impact act over time for example moving the full

retirement age from 65 to 67 has had a dramatic impact on the payout moving full retirement age from 65 to 67 without a corresponding move in the actions of the workforce has meant that people get paid less and people on average take Social Security today at age 62 the majority of people do now

that’s the first year that they’re eligible this means that people aren’t working longer by and large to age 67 additionally if someone wanted to draw social security at age 62 and say invest it the maximum they could earn without having to give part of it back would be $ 22,32 in

2024 for every dollar beyond that they have to give back 50 cents once they reach full retirement age they can earn as much as they want next the taxability of Social Security went into effect in 1983 at which point up to 50% of your Social Security became taxable if you earned over a certain

amount that went to 85% in 1995 the problem is that those thresholds haven’t changed the ones that were put in place in 83 and 95 respectively which means that you’re far more likely to pay tax on your Social Security today than you would have been back in the day next

Debt in retirement is more prevalent than it is today than it ever has been in the past according to the 2022 survey of consumer fin es which actually came out this year for the period ended 2022 65% of retirees between 6574 have Debt in retirement that amounts to

on average $113,000 of Mortgage Debt and $45,000 of other Debt car student Loan Credit cards for example it gets a little bit better at age 75 plus the number goes down to 50% of retirees at that point for reference 20% of the 75

plus crew had Debt in 1989 so we’ve gone from 20% in 1989 to 50% in 2024 this is of course a byproduct of tougher times easier Credit standards and just a general belief the Debt is going to be part of one’s life next inadequate

retirement Savings the average reti has a median retirement Savings amount of $200,000 now that sounds like a bit of money and it is but using the 4% rule the 4% withdrawal rule $200,000 at 4% means that you can withdraw $88,000 per year when combined with an

average Social Security payment of $ 18,60 that means the average retiree is bringing in approximately $26,000 of spendable Income per person the survey of consumer none;">Finances isn’t far off by the way they ask the question directly what is the family Income and that number for a retiree is $60,500 for a family so there’s probably some pension Income in there but frankly not much what does this

mean well for some people it’s fine the amount is adequate enough but when you overlay the Debt that we talked about then the picture starts to change The Debt Service payment on $158,000 per person at 4% is approximately $88,000 per year per person this

means that if a couple was bringing in $653 if you subtract 8,000 * 26,000 they’re actually bringing in $44,500 next Rising health care costs all right let’s talk about the elephant in the room the average retire couple thinks that they’re going to spend approximately $41,000 over

their lifetime combined in medical related costs and this number is primarily in their mind the cost of Medicare and the associated Medicare metag Gap policies but the actual number according to Fidelity is $318,000 for that couple so why is there such a big gap well first people only think about

Medicare and the costs related to Medicare but they don’t think about the health Insurance payments that they have to make if they retire before age 65 they still have to pay for medical Insurance Insurance and that can be quite costly up

until age 65 the second is a cost that almost no one thinks about and that’s the cost of long-term care most people don’t think that they’re going to need long-term care but in fact many do and the cost perom is $108,000 for long-term care per person next is the pension shortfall

of a company itself before the Advent of a 401k the company’s provided something called a defined benefit plan meaning that the benefits you would receive were defined at the beginning of your employment you knew with a very strong degree of certainty what you’re going to receive in

retirement if you stuck with a company for 30 or 40 years this type of plan engendered lifetime employment dedication of the company and skilled employees pass their skill down to other employees who came into the workforce later now the model’s turned upside down today people are thought of

in terms of where they fit in the contribution to in many cases the Revenue of the company for example if you’re a Revenue generator like a salesperson you fall into one category particularly if you’re a really good salesperson if you are a cost center

like someone that does something outside of sales and marketing for example in many cases you’re actually considered a different type of employee cost centers are often outsourced that is always true of course because there are some very skilled people who do what they do that aren’t

generating Revenue but it is a higher risk category conversely if you’re not good at generating Revenue you’re at extreme risk of being put out of business very very quickly because in many instances you’re either a Revenue

generator or you’re not it’s either in your DNA or it’s not overlay the fact that Union agreements have absolutely crushed the defined benefit plan and you now have a situation where people are contributing to their 401k and that is their primary source of retirement

Revenue there are exceptions to this of course government jobs do still have defined benefit plans but most corporations no longer offer this feature next Market volatility most people retiring today have seen a wonderful run in the market over the last 40 years but it hasn’t

always been that way for example when stag flation hit the period between 1973 and 1982 prices continued to go up but the market effectively stayed flat over that period of time let me explain in 1972 the S&P 500 closed the year at 1118 in 1981 the S&P 500 closed the year at 122 effectively

flat for that 10-year period for reference the average cost of a McDonald’s hamburger was 21 cents in 1972 and 45 cents in 1981 is it possible in the years ahead we could face prolonged periods of high Inflation and low market performance well you tell me in a future

CashNews.co I’m going to talk to you about how to manage these issues if you’re worried about them so make sure you click subscribe and turn on notifications so that you get alerted when I post a CashNews.co I post approximately once or twice per week also if you want to see a different

side of me check me out on Instagram I’m at the handle theore Schmid list also if you like this CashNews.co check out that CashNews.co on why the majority of people take social security at age 62 this is Jeff Schmid thanks for watching