Baby Boomers and their assets

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Submitted by sdgrrl on February 13, 2014 - 4:12pm

Hello,

Long time in posting and hope all are well. Curious what the piggies think of what is going to occur as the Baby Boomers begin to retire and start unloading assets.

Will they have a great retirement due to their home value? Will the market be inundated with a flood of homes? Did our Baby Boomers en masse not prepare accordingly for their future and we will possibly see foreclosures for the elderly increase?

Thoughts?

Submitted by flyer on February 13, 2014 - 4:39pm.

Baby Boomer here.

I know much of the research shows many BB's are no more prepared for retirement than any other age group, but the retirement stats in every age group across the board are far from impressive, especially when you realize only 5% of the entire population in the US have a million or more in assets.

I can't speak for all BB's but, personally, we're well positioned for retirement, and most people we know in our age group are as well. We don't plan to unload our assets, but plan to pass everything along to our kids--rental properties, etc.

IMO, it will affect various geographical areas of the country in different ways, but, again from the people we know, I don't see anything on the radar that would indicate Baby Boomer retirements will result in mass foreclosures, or other dire circumstances in the San Diego area, but only time will tell.

Submitted by The-Shoveler on February 13, 2014 - 4:40pm.

All of the above, some of the above and none of the above.

I am probably the exception
Most of the boomers I grew up with have stayed in very stable relationships (one marriage)
Most own their own homes in Socal outright and they are planning to age in place, but that is most likely very unusual.
I know some exceptions to the above though (maybe 10% or so of the boomers I know) who are not doing so well.

Submitted by The-Shoveler on February 13, 2014 - 4:54pm.

One other thing I hear from my colleagues in the bay/silicon valley area is one of the biggest complains is people don’t move out of the bay area once they retire.
You would think they would want to cash out and move someplace (like say SD).
But they just stay where they are. Weird.

Submitted by flyer on February 13, 2014 - 5:07pm.

I can understand that, TS. Most, probably have the funds to stay, and their kids, grandchildren, and extended family are there, so they have no reason to relocate. Like us, they're probably planning to pass their assets along to the next generation, rather than cash out.

Submitted by sdgrrl on February 13, 2014 - 5:12pm.

I know many Boomers who plan to stay in their homes until they die or are forced to move. The whole generation is interesting to me as they had a lot going for them and against them.

They had low home prices in their younger years, education was cheaper and some are part of a pension system.

On the flip side, they went through the 90s recession, the dot com burst and then the 2008 crash.

The Great Generation endured the Depression, but those who made it through witnessed the post War boom and could prosper with hard work.

The Boomers...not sure what to think.

X, Y and Millennials...we will see as well.

Submitted by flyer on February 13, 2014 - 5:21pm.

Personally, we love what life has brought us as BB's. No complaints here. Since we're still in our 50's, our kids (who are doing well on their own) might have to wait awhile before cashing in on our assets:)

Submitted by FormerSanDiegan on February 13, 2014 - 5:23pm.

The first boomers (born in 1946) turned 65 in ~2011.

We should be seeing a start of some sort of trend if these folks are unloading their assets.

BTW, my father-in-law is one of those leading edge boomers. He retired in place at 65 in a house he bought 10-12 years before retiring. He's living off social security and a part-time gig. He's not pulling from his retirement account, not moving, so I have seen no immediate unloading of assets.

Plus, if they were unloading assets, it might even be stimulative to the economy, as they would be unloading for the purpose of consuming. Rather than saving for retirement.

My gut says that the impact of boomers unloading assets is greatly overexaggerated.

Submitted by The-Shoveler on February 13, 2014 - 5:35pm.

One Thing I think I must say, coming from L.A. homes were “NEVER CHEAP”
It was always a big event if you bought your first home and it was all you could do to make the payments.
(the possible exception was mid-90’s crash which I only know one boomer who bought then) and the 2008-2011 crash.

They only look like they were cheap when you see today's prices (and most have grown used to almost no inflation so it distorts their view of things).

Trust me it was a Struggle.

Submitted by Coronita on February 13, 2014 - 5:38pm.

Quote:

Long time in posting and hope all are well. Curious what the piggies think of what is going to occur as the Baby Boomers begin to retire and start unloading assets.
Will they have a great retirement due to their home value? Will the market be inundated with a flood of homes? Did our Baby Boomers en masse not prepare accordingly for their future and we will possibly see foreclosures for the elderly increase?

The ones that managed their money well will live a wonderful life..And afterwards figure out a way to pass on their assets to their heirs..

The ones that didn't well, they are screwed...

Just like in every part of life.. there will be winners and there will be people who lose.

Submitted by sdgrrl on February 13, 2014 - 5:37pm.

I am way to used to FB. I was looking for the "like" option. Haha

Submitted by Coronita on February 13, 2014 - 5:39pm.

sdgrrl wrote:
I am way to used to FB. I was looking for the "like" option. Haha

people like you are the reason why FB stock is $65/share instead of $18/share.

(serious remorse of not buying any shares back when things were $18... Thanks for nothing...)

:)

Submitted by sdgrrl on February 13, 2014 - 5:40pm.

flu wrote:
sdgrrl wrote:
I am way to used to FB. I was looking for the "like" option. Haha

people like you are the reason why FB stock is $65/share instead of $18/share.

(serious remorse of not buying any shares back when things were $18... Thanks for nothing...)

:)

You aren't alone in that ;)

Submitted by Coronita on February 13, 2014 - 5:47pm.

sdgrrl wrote:
flu wrote:
sdgrrl wrote:
I am way to used to FB. I was looking for the "like" option. Haha

people like you are the reason why FB stock is $65/share instead of $18/share.

(serious remorse of not buying any shares back when things were $18... Thanks for nothing...)

:)

You aren't alone in that ;)

I'm trying to work on not being in the loser category in generation X....

....However, the punchline someone should say is "so how's that workin out for you, FLU? Try harder...loser...."

Submitted by sdgrrl on February 13, 2014 - 5:48pm.

flu wrote:
sdgrrl wrote:
flu wrote:
sdgrrl wrote:
I am way to used to FB. I was looking for the "like" option. Haha

people like you are the reason why FB stock is $65/share instead of $18/share.

(serious remorse of not buying any shares back when things were $18... Thanks for nothing...)

:)

You aren't alone in that ;)

I'm trying to work on not being in the loser category in generation X....

....However, the punchline someone should say is "so how's that workin out for you? Try harder...loser...."

I'm dyin' over here!

Again, from one X to another- you are not alone

Submitted by edna_mode on February 13, 2014 - 6:18pm.

Comic on Gen X and real estate. Not sure I agree!
http://2.bp.blogspot.com/-AT9fFMD5bms/Tu...

Submitted by sdgrrl on February 13, 2014 - 6:42pm.

edna_mode wrote:
Comic on Gen X and real estate. Not sure I agree!
http://2.bp.blogspot.com/-AT9fFMD5bms/TuhTshwhG8I/AAAAAAAACh0/aV_Xppuqo48/s400/genxx.jpg

That is great. Hmmm...in SD I would agree. In other areas I find you can have your cake and eat it too.

Thank you for sharing.

Submitted by The-Shoveler on February 13, 2014 - 7:09pm.

I think also boomers have been colored a bit by having lived (and worked) through some very high inflationary periods.
It was buy big now you will be able to afford it later. (when you have been living through 10-14% wage inflation). --- that counts promotions etc…. as well.
Not so much in later generations I think but X should have seen the tail end of that.

the 60's had some high inflation also the weird low-inflation period starting mid 90's I think (well weird from a boomers Perspective).

What X views as cheap homes was just the work of inflation (well for the most part).

Submitted by flyer on February 13, 2014 - 8:34pm.

.

Submitted by flyer on February 14, 2014 - 6:22am.

edna_mode wrote:
Comic on Gen X and real estate. Not sure I agree!
http://2.bp.blogspot.com/-AT9fFMD5bms/TuhTshwhG8I/AAAAAAAACh0/aV_Xppuqo48/s400/genxx.jpg

Per the above post, it's interesting how younger generations might think BB's have had to choose between having a house or having a life, when we, and most people we know--other airline pilots, real estate investors, film executives--all of whom happen to be BB's--have found it is definitely possible to have it all. Apparently misperceptions abound.

Submitted by livinincali on February 14, 2014 - 8:40am.

Boomers are in their peak asset accumulation years still. They are near the top of the wage scale and all looking for assets to fund their retirement years. Assets are purchased with discretionary income, while mortgage debt is debatable stocks and bonds are not. The problem is that not only will some boomers look to cash in their assets, the demand for assets from the boomer generation will shrink as well. We all know the next generations for the most part as broke as hell and up to their eye balls in debt. Always ask yourself who are you going to sell to. Could your kids or your neighbor kids afford to buy your house at it's current price. You have to sell to somebody's kids.

I just don't see how this ends well. At a macro level I expect most assets prices to crash as the supply/demand curve switches. That said there are probably various pockets of assets that will always remain valuable, it's just incredibly difficult to guess right. The bottom line is comfortable retirement for the masses is a new concept in society and we likely don't have the economy or resources to support it.

Submitted by The-Shoveler on February 14, 2014 - 11:18am.

I think “Owner Equivalent Rent” caught Gen-X off guard (some Boomers as well)
They were always used to inflation following home prices (SURPRISE!!!).

Yea that did not happen (the bust of the 90’s should have been a shot across the bow).

Now you got the Fed trying to figure out how to do this without it looking obvious IMO.

Submitted by Jazzman on February 14, 2014 - 11:24am.

You need a pension and/or assets that provide income to retire. The challenge for the latter has been so much volatility in stocks and bonds of recent, it has forced many into RE, or to hold onto rentals for the yield. That trend might reverse if the economy improves and baby boomers feel better about financial products, especially bonds. Income and capital preservation becomes more important in your later years. When asset prices get artificially inflated, it doesn't necessarily inspire confidence. If you don't have ties to a particular place, downsizing and moving is an option to release capital, but the problem of where to invest for income doesn't disappear. I would imagine many boomers are also cash hording at the moment.

Submitted by The-Shoveler on February 14, 2014 - 11:37am.

I think the percentage of boomers who hold rentals is fairly small.

The issue in SoCal I think as well for retiring boomers is (where is it better ?)
If they don’t need to sell their primary this is.

Sure some will be forced by health to downsize etc... but it is not going to be all at once.

It's going to be a slow onzy_twozy process.

Submitted by FlyerInHi on February 14, 2014 - 12:43pm.

Michael Fink of black rock says there is cause for worry.

Can people living to their 90s expect to retire in their 60s?

Submitted by livinincali on February 14, 2014 - 12:45pm.

Jazzman wrote:
I would imagine many boomers are also cash hording at the moment.

Some might be but with many not having enough saved for retirement, they are probably more likely invested in riskier assets looking for the 8-10% that always gets touted.

The reality is that many boomer retirees are significantly exposed to the stock market. Many have pensions or 401K plans with few options. The big problem with asset being sold isn't that some boomers will hang on to assets because they aren't giving them away. The problem is pension funds don't have that option. If they are on the hook for pension payments that exceed new money coming in they are forced sellers.

Submitted by sdgrrl on February 14, 2014 - 3:35pm.

Gen X and latter for the most part will not have any type of pension. My hubbie's two grandfathers both worked for Ford. One was white collar and the other blue collar. The blue collar one retired in his mid 60's and lived till he was 97. The man had a great, albeit simple life.

My father in law receives his military pension, a pension from American Airlines, one from a co called Cobra and then SSI. The man is making more now then when he worked. He worked hard and I'm happy he gets to travel non stop and just enjoy life.

Flash forward to my hubbie- he invest in his 401k to the max, but the numbers still don't make us feel comfortable. My income goes to savings as well, but it will take a great great deal of work to have the retirement my GF and FIL have had.

Submitted by Coronita on February 14, 2014 - 3:43pm.

sdgrrl wrote:
Gen X and latter for the most part will not have any type of pension. My hubbie's two grandfathers both worked for Ford. One was white collar and the other blue collar. The blue collar one retired in his mid 60's and lived till he was 97. The man had a great, albeit simple life.

My father in law receives his military pension, a pension from American Airlines, one from a co called Cobra and then SSI. The man is making more now then when he worked. He worked hard and I'm happy he gets to travel non stop and just enjoy life.

Flash forward to my hubbie- he invest in his 401k to the max, but the numbers still don't make us feel comfortable. My income goes to savings as well, but it will take a great great deal of work to have the retirement my GF and FIL have had.

Worrying about it is half the battle. Most people don't know or don't care... The fact that you and your hubby do already says something....

(At least that's what I keep telling myself...)...

W2 salaries are the worst way to accumulate wealth BTW...

Submitted by sdgrrl on February 14, 2014 - 3:48pm.

W2 salaries are the worst way to accumulate wealth BTW...[/quote]

Would you expand on that?

Sincerely,

S

Submitted by joec on February 14, 2014 - 7:18pm.

flyer wrote:
edna_mode wrote:
Comic on Gen X and real estate. Not sure I agree!
http://2.bp.blogspot.com/-AT9fFMD5bms/TuhTshwhG8I/AAAAAAAACh0/aV_Xppuqo48/s400/genxx.jpg

Per the above post, it's interesting how younger generations might think BB's have had to choose between having a house or having a life, when we, and most people we know--other airline pilots, real estate investors, film executives--all of whom happen to be BB's--have found it is definitely possible to have it all. Apparently misperceptions abound.

This is probably because the cost of required spending like transportation, healthcare, education, food, are all up a ton from before...

When we were young, college and housing in "decent", non exclusive areas was pretty affordable relative to most incomes I think and college and healthcare was DEFINITELY more affordable compared to now. Even state tuition is very expensive now and we used to pay well over 1k / month for healthcare when 20-30 years ago, it was free for the worker and the family at many jobs.

I don't think there will be a huge crash though since the whole world is more global now so even if many long time people can't buy homes here, you have pretty much everyone capable from buying from Asia, Europe, India, Mexico, you name it wanting to diversify their assets out of their own countries and put it in US real estate. In a lot of these other countries, housing is even worst for what you get so there is very limited shortage of buyers compared to supply IMO. It's a global world/economy now and the US is still one of the safest places to "park" assets from probably China, Brazil, Russia, etc...

Families who own a lot of properties are also probably wealthy so there is limited/no need, rush to sell anything. I know my parents and in-laws all have a fair amount of real estate so there isn't a cash crunch...

For the "general/typical" American, yeah, it looks bad. But they never had the assets or homes to begin with as mentioned in many retirement/assets owned surveys.

Since these people who own the assets aren't financially strapped, they will just sell when it comes back. Sorta like if you look at high end collectibles/art, etc...the prices seems to never drop or go down. Those buyers can just wait it out (not counting the crazed 2005 housing bubble of course since that was more of the general no-cash down flipper).

Submitted by Coronita on February 14, 2014 - 7:21pm.

sdgrrl wrote:
W2 salaries are the worst way to accumulate wealth BTW...

Quote:

Would you expand on that?

Sincerely,

Sure. If I was to do it over again, I would have invested much much earlier in things like real estate where it could produce income without actually slaving away at a job...

Also, if I were to do it again, I would probably have focused more time on running my own company longer instead of converting over to a w2 when I got older....

W2 is taxed to the max....

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