When the film, “How to Marry a Millionaire”, was made in the early 1950’s, the front edge of the baby boom generation was entering grade school. Today, and every other day of the year, almost 10,000 boomers reach “retirement age”, and this will continue for another 15 years or so. While millionaires still contend a desirable status, the $1 million from the movie would now be over $8 million given cost of living increases for the ensuing 60 years. Perhaps most people won’t need $8 million to retire, but in many cases, far more than $1 million will be required.
The expectations of baby boomers, my own generation, are sometimes at odds with financial realities. In our generation, company pensions mostly disappeared; families became more splintered with divorces; job changes became the norm; and life expectancies increased. This combination is not a formula for growing wealth.
For many years, economists have argued about the breadth of anticipated wealth transfers from boomers’ parents to boomers. While this has happened in some instances, for the main, it has not matched what was anticipated. Boomers continue to expect inheritances will make up for their own financial mistakes. Count me as a skeptic. Even if the money does materialize, the financial habits that have generally been lacking will not automatically change. Money outside of the context of personal goals has little meaning. A quick glance at the financial problems that follow most professional athletes and entertainers attest to that truth.
Adjust the Lens
The good news is this is a solvable problem. The starting point is to “change or adjust the lens” through which you view retirement needs”. Do your expectations match your actual resources? If you have “big plans” for the future, as one TV ad says, do you also have “big savings”? One follows the other. The next step is to embrace risk as a necessary ingredient in the recipe for retirement. The final big piece of the puzzle is to adjust your thinking on when you actually fully retire. Working (and saving) for 3 or 4 more years will make a sizable difference.
One Size does not Fit All
There is no single fixed retirement model that is right for everyone. Finding the right match between realistic retirement spending needs and available financial resources is not a one time decision. The framework will likely need to be adjusted several times over the retirement years. On measure, my generation is blessed to benefit from longer life expectancies. We just need to change our expectations a bit to make the second half of life work for us.