Give the baby boomers some credit for this latest wave of stock market upsurge. Yeah, I know that sounds just like a boomer – arrogant and self-absorbed. But listen to my reasoning and then decide whether I’m right.
Boomers are obviously older than all but the oldest in our population. That generally results in a bit more job security because they have seniority. And, indeed, the numbers comfirm that. The unemployment rate for those over 50 is considerably lower than for those under 50. The unemployment rate for 55 to 64-year olds is about 5.7%, considerably less than the overall number which is 7.9% (the rate for 45- to 54-year olds is about 6.1%). So what does that mean and how does that translate into a bull market?
Simply put, the baby boomers are not hurt as badly by the recession as are the rest of the population. They (we) don’t feel as negative and probably have greater optimism. Why?
For one, we’ve been through a number of downtowns and have seen upswings that followed. The sky didn’t fall and we are now better off than we were a few years ago. We bought our houses longer ago than the others and even with the drop in the housing market, many of us still have some equity. In addition, we don’t tend to move as often as younger people so we probably didn’t have to sell at a loss.
Secondly, we have more money overall in our retirement accounts and other investments than do the young-uns. We don’t like seeing the returns of 1% or less that we get from CDs and other conservative investments. We are an antsy group and in this our arrogance helps us. We’re anxious to have our net worth be worthy of us!
Thirdly, we probably don’t have to plan for as many big expenses coming like college expenses for our kids. Most of this age group are already empty nesters or in the final years of paying the expenses for our kids. We’re seeing more of the light at the end of the fiscal tunnel now. We’re seeing that ahead lies our later years and we want to do what we can to be better off than it looked like we’d be. Sure many of our kids have rebounded and are staying with us. But we see that as temporary. And yes, we have other major expenses such as weddings and caring for our parents. But our kids are waiting longer to get married and the drain on us for caring for our parents is less about the financial difficulties than about the emotional strain, lack of time, complex insurance and legal concerns, and day-to-day caring concerns.
The result? We invest. We see a few hopeful signs and we move more of our money out of those safe investments into equities. We want to feel positive. We want there to be gains in stocks. As we learned long ago in our Econ 101 classes, that optimism drives the stock market higher.
So where does it go? Here’s what I think, to the extent that it matters. It goes up. Then down, then up again. It’s what the market does. In the short term we’ll see a bit more ride upwards. Then some folks will get scared or there’ll be some international news that causes jitters. Then we’ll get our perspective back and see another ride up. What we’ll experience is just like what we’ve experienced in the past. Only with more dollars and more people involved. That will cause even more volatility. But in the longer term, all that up and down will even off.
What we’ll also see is a slight decrease in the kinds of upswing returns since more of us, as we age, will heed the advice of good planners and will be more conservative with our investments. More of us will be working less or retired. More of us will be on fixed income, some just on Social Security. More of us will die.
But we won’t lose our optimism. We pronounced long ago that we changed the world and we still think we can. It’s all about us, right?
As the election draws nearer, I would be remiss if I didn’t blog about how the presidential candidates’ positions might affect elder care, health issues (including health care and health insurance), and quality of life concerns of older folks. Because of the magnitude of this issue, I will have separate installments on the topic.
I begin with Obamacare.
First let me say that while the President doesn’t mind that the Affordable Health Care Act is referred to as Obamacare, I mind. I think it’s a total misnomer. The Act does not have that much to do with health CARE. It has to do mostly with health INSURANCE. I think the President and the supporters of the Act did a great disservice to all of us by suggesting it was about healthcare. It riled people. It scared them. All of a sudden people were feeling that there would be something – in particular, government – between them and their doctors.
But when you look at the Act, it doesn’t have anything between them and their doctors. It does create a Board that can suggest, recommend, and maybe even ultimately insist (if legislation followed) that certain things be done to streamline healthcare or that costs of drugs and medical care be reduced. But there’s nothing that will prevent an individual doctor from recommending a particular procedure for a patient. In fact, it’s not any different than what exists now under most health insurance plans. Many plans require preauthorization for certain procedures – things like MRI’s, PET scans, etc.. That won’t change under the new law. And if it did, it would be universal, not specific to one plan. Right now individual companies contract with health insurance companies to provide coverage for their employees. The companies negotiate rates and terms and companies try to get as much coverage – and more important, as much flexibility in the plan – for the money. A lot of what we used to have has changed, mostly increased in cost. But not all. Here’s an example of a way that a company improved the options for employees.
A company I’m familiar with offered 2 health insurance plans: one for just an individual employee and another for an employee and his/her family. The rates reflected the difference. But the family plan was geared for families with children, who are notoriously more sick and injured than adults. The organization negotiated with the insurance company to provide a third plan: employee and spouse/partner. Because the plan covered only two people, the rates were far lower for this couple than for an entire family.
Since the new Affordable Healthcare Act has many good provisions (e.g. covering kids ‘til they’re 26, no elimination based on preexisting condition), what’s the downside? That now everyone has to be a part of it? Hello? Is there something wrong with that? It’s just good policy for a country. The only way it can be affordable is with healthy people participating. Ergo, the individual mandate. For me, the Act protects everyone, not just those who have employers that provide health insurance. I never saw the logic in tying insurance to employment. Insurance, in particular health insurance, is about individuals and families, not about employers.
So back to the political arena. Since I believe this is a good law, and since the only candidate agreeing with me, my support goes to President Obama. Seniors, juniors, and everyone in between should be for this new law. Now if Governor Romney changes his mind (again) and decides that he really is for this law, I’d gladly revisit this endorsement. The whole law, after all, is one that he endorsed when he was governor of Massachusetts. But it’s not likely Mr. Romney will agree to be labeled with “I was for it before I was against it.”
Bottom line regarding health insurance and whether i: Obama. Stay tuned for my next political blog.
Please excuse the absence of a new blog. I've been working on my latest book and just didn't have the time to write anything else.
The new book will be out in February and it's a joint project between my publisher, John Wiley & Sons, and AARP. I'm very excited to do this book because I think it addresses something that many of us face, particularly those of us in the sandwich generation. Although my parents and in-laws are all gone now, it wasn't that long ago that we were dealing with their crises. The new book's title is long so as to maximize search engine optimization – you try to hit as many key words as possible so Google searches bring up your book. The title is AARP Roadmap for the Rest of Your Life with a subtitle of Smart Choices about Money, Work, Insurance, Lifestyle... and Pursuing Your Dreams. Whew, quite a handle. About the only thing we missed was sex. So maybe we should have called it the AARP Fifty Shades of Gray.
Anyway, as it implies, it's about living the rest of your life. We have our families to deal with, our kids and parents. We have our careers, perhaps winding down. We face retirement concerns that include money, leisure time, and choices. We have our insurance issues with many of us on or about to be on Medicare. And we have the concerns about aging and health.
The whole project began when I participated in a panel discussion sponsored by AARP. The author Gail Sheehy talked about how she and her husband had faced serious health problems and, in fact, signed up for palliative care. The doctor came to them and asked her husband, who clearly had significant mobility limitations and other health problems, "What are your goals for this stage in life?" I thought, "Wow, what a great question." I didn't have an answer for that and I'm not facing end of life issues.
So the book also addresses goals, role models, and questions we are now or will be asking ourselves as we get older. It deals with the very practical areas we have to face as we age, including our finances and signing up for Social Security and Medicare. I guess the most important message I relate in the book is to not judge aging. We are who we are and getting older is not something to fight or shy away from. As the old joke says about getting older, "it sure beats the alternative."
In the book I create a Level of Activity scale, something that you can use to help guide you (or your aging parents). Where you are on the scale, much more than your chronological age, will likely have more influence on your choices than anything else.
So please watch for my new book and watch this space where I will continue to blog about important issues.
Thanks for reading and please post your comments and questions.
We all are used to saying – and hearing – that we as a society have great respect for our older citizens. After all, we’ve set up great programs to help those in need as they age. Medicare is terrific, providing insurance for those who need health care (and who doesn’t). Social Security has helped millions and millions of Americans sustain themselves after their work years were no longer possible, or as a supplement to savings. Sure, there are problems with both of those programs. But this blog is not about those two programs, per se. It’s about looking into the future and deciding whether we want to put our money where our mouths are.
The life expectancy for men is about 78 years and for women about 80. But according to the Society of Actuaries Retirement Participant 2000 tables, a 65-year old man has a 20% chance of living to 90 and a 65-year old woman a 32% chance of living that long. Furthermore, a married man and woman have almost a 20% chance that one of them will live to be 95. Think about the implications of that. With the average social security benefit being in the neighborhood of $1230/month, can our society afford those payments, particularly as we see health care costs rise? And what about the need many of those longer-living folks have for maintenance care, not medical or skilled care, just the activities of daily living. You know: eating, bathing, dressing, toileting, transferring, etc. How can we possibly manage?
Fifty years ago or so, there were about 15 or 16 people working for every retiree. More recently, in 2005, that number dropped to just over 3, including all of the immigrants. And the latest data show that in the next 20 years that number could drop to just 2 workers for every retiree! Two! And I’m not even mentioning how much longer each retiree will live or the health care they will require.
In Japan, these numbers are so much more alarming but show us what our future might look like. In Japan they anticipate that in 20 years there will be just 1 worker for each retiree, and their life expectancy is even higher than ours in the US. What they’ve done over the last 10 years or so is increase their revenue by raising the premium rates for employee and national pension programs like ours. They certainly put their money where their values are. It’s probably not enough but they seem to be confronting the problems.
But what about here? Are we willing to see our parents (or our own) benefits drop in relation to our needs? Will you be able to sustain yourself until you’re in your 90’s? We keep talking about our unwillingness to pass along our debt to our children. Yet we don’t seem to be willing to pay more to do so. We keep saying that we need to cut, cut, and cut some more. Sure, let’s cut where we can. But why is it that we are so unwilling to contribute more to social security? We keep saying that it’s OUR money. Nope, it’s now ours, any more so than the money we spend to defend our nation. The money we contribute toward Medicare and Social Security is money to help our parents and grandparents. We’ve got to stop talking as if the money we pay is ours and start allowing the rate and the maximum amount of our annual contribution to rise. It’s the only hope we have to sustain the future.
We all know of senior citizens who play ball, ski, run marathons, and work out religiously well into their 80’s. We tell them they don’t “act their age.” But of course, they do. They are 70 or 80 years of age but have managed to stay very active and are in great shape. They laugh – disdainfully actually – when you tell them “they don’t look 80.” That’s because they don’t have any sense of chronology. Through good genes, some luck, a lot of hard work, and great motivation they do what they love. Similarly, many of these people often continue to work in their chosen field well past what anyone would call a retirement age.
At the same time, there are many others who, for whatever reason, cannot play sports or do the same kinds of activity even if they wanted to do so. They may have health problems, injuries, or other limitations. They may be equally motivated and live a normal life despite these limitations. They also just may not enjoy physical exercise or exertion and prefer a more sedate life. Some may be disabled and have been for some time so they’ve chosen a different path for themselves, one that allows them to do the things they enjoy without physical restraints.
So when we are speaking with our aging parents one of the key factors to consider is the degree to which they want to and can be active. Then you can help them reach that level. Come to think of it, when we're thinking ourselves about how we plan to live the rest of our lives, this might be a pretty good way to view it.