When Boomers Go Bust
WASHINGTON (March 10) -- When 77 million Americans are the problem, it's hard to overlook it. Yet Congress was told last week that those millions have barely begun to grasp that their own futures are at stake.
They are, of course, the baby boom generation.
World War II ended with a boom -- Hiroshima. Then came the Boomers, the post-war population explosion born between 1946 and 1964. Their impending retirements early in the next century threaten to explode the federal budget and trust funds which most Americans have come to count on.
President Bill Clinton is on the leading edge of the demographic bubble. He turned 50 last year. Thanks to taxpayers, he has no worry about retirement, pension or health care for the rest of his life. Most of the others do.
We've heard this before, haven't we?
And yet it appears to be slow sinking in.
"By starting today to tackle this challenge of the baby boomers we can avoid a crisis," Sen. Charles Grassley (R-Iowa) suggested as he opened a Special Committee on Aging hearing last week on the problems that will arise with the boomers' retirement.
"We're in the beginning of the process, not at public judgment," warned Madelyn Hochstein whose DYG, Inc. has conducted a substantial survey of public attitudes for AARP, The American Association of Retired Persons.
That study found an increasing number of Americans and even more baby boomers -- about a third -- would opt out of the Social Security system if they could. Sixty-two percent of the boomers were "confident (they) could do better on their own" investing the same money paid into Social Security.
However, 87 percent of the boomers also said that they "may not need Social Security when I retire but want to know it is there in case I do."
Hochstein told the Senate committee that's "contradictory data" that says neither the boomers nor the public in general have grasped the fullness of the issue.
Hochstein's survey found 87 percent of Americans feel Medicare's funds would be sufficient if only the "waste, fraud and abuse" were taken out of the system. The senators audibly gulped.
Sen. Harry Reid (D-Nev.) suggested curbing waste, fraud and abuse, essential though that is, would net about $20 billion yet still be only about 10 percent of what's needed.
"Amazing," said Sen. John Breaux (D-La.) that 87 percent think the solution is that simple. "It means we've got a long way to go before we can even talk about changing the system."
Repeatedly, experts in the fields of Social Security, Medicare and private retirement plans told the senators they still have a huge educational role to play before they can write the laws that will effect not just the boomers, but all generations.
This committee, which deals with aging, not just the aged, needs to shift the focus beyond Congress' fixation with balancing the budget by the year 2002.
"I have the impression the American public does not understand the magnitude of the problem," says Gail Wilensky of Project Hope, a Medicare administrator in the Reagan administration. Balancing the budget, Wilensky says, "hinges on moving money around." The bigger need is to look at the problem in 2010 and 2030.
Balancing the budget "is easy lifting" compared to the long-term restructuring of both the retirement and health care systems, according to David Walker, who has analyzed Social Security for Arthur Andersen.
"In 1950 there were 16 workers per retiree. Today there are 3.4; in 2030 there will be less than two," Walker told the committee. That creates a huge burden for the "baby buster" generation to sustain the overweighted boomers' retirement.
Medicare's problem lies both in demographics -- more patients on the way -- and in the high costs of medical care.
"Medicare is growing at a rate of 8.5 percent per year, the federal budget at 5.2 percent and the gross domestic product at only 4.8 percent," Wilensky testified.
The third leg on the boomers' retirement stool -- personal savings -- is also wobbly. Americans are notoriously poor savers relative to other nations and relative to what they'll need to maintain a comfortable standard of living in retirement.
"The only way you're going to accomplish that is through a mandated savings requirement of some sort," says Dallas Salisbury, president of the Employee Benefit Research Institute. Salisbury says EBRI's reports found "only a third who say they are able financially to save."
The baby boomers are, of course, not out there alone. They are also sometimes known as the sandwich generation, squeezed between their parents and children. Many are strapped putting their kids through college. Many will find themselves supporting aged parents. Some will have to do both.
Money, as we all well know, is not distributed evenly.
Three-fourths of the nation's financial assets are held by folks over 50. Yet the elderly are just as likely to be among the nation's poorest.
There is an estimated $11 trillion in wealth that baby boomers might expect to inherit in the largest generational transfer of wealth, if their elders don't spend it.
More boomers are likely to have defined benefit pensions from their employers than their parents had. Yet boomers' net worth is less than half that of their parents at the same age.
Solutions tend to be limited for preserving both Medicare and Social Security -- lower benefits, raise taxes, restructure the systems.
"Young people favor cuts in benefits. Older people want increases in taxes," says Barry Bosworth of the Brookings Institution. "It's inherently divisive."
The Committee on Aging, only beginning its assessment of the problems facing the boomer generation, offered no immediate solution. But it heard one that may be inevitable for many.
"Delaying retirement," says Olivia Mitchell of the Wharton School at the University of Pennsylvania, "is the least disruptive way to prepare for old age."