If you had any doubts, check out these nuggets from a new study by David Rosnick and Dean Baker of the Center for Economic and Policy Research (h/t Robert Wuebker). Boomers are really screwed.
So much home equity has been lost that 30% of boomers, aged 45 to 54, are underwater in their homes, according to “The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble. ” The report, released by D.C.-based think tank the Center for Economic and Policy Research, also found that 18% of boomers aged 55 to 64 would owe money at close if they sold their homes.
The CEPR also found that people who were renting homes in 2004 will have more wealth in 2009 than those who were owners. That’s true for all five wealth groups the study analyzed, from the poorest to the wealthiest …
Boomers between 45 and 54 have lost 45% of their median net worth, leaving them with just $80,000 in net worth, including home equity, according to the report. Older boomers have fared marginally better. Those between 55 and 64 have lost 38% of their net worth, leaving them with $140,000. But this group is rapidly nearing retirement age and they have few working years left to make up the losses.
The full study is here.
March 2nd, 2009 at 11:19 am
How about if someone bought their house in 2001, or 1998?
Things change depending on the horizon of numbers used. They picked that timeline for a very specific reason, to prove a point they view as a foregone conclusion.
A lot of simple solutions for those near retirement – properly manage your portfolio moving from stocks to bonds as you approach retirement, don’t sell your house now during a down market, keep your job, work hard, spend frugally.
March 2nd, 2009 at 11:55 am
Boomers with $140,000 of net worth are not going to be able to generate significant income from that level of savings / investments. Consequently, they will need to depend on Social Security and private pensions (many of which are underfunded). It appears retirement will have to be delayed by several years for many of these people. The delay has the benefit of generating larger Social Security checks when one finally retires. However, older people remaining in the labor force reduces the number of opportunities for younger people to get a job. Bit of a quandary.
March 2nd, 2009 at 11:55 am
Measuring one’s status by the size of one’s house is the wealth fallacy that created this trap. I know many people (baby boomers and older) who moved to ever bigger houses in suburbs and exurbs after all the kids had left. 4000 square feet or even 8,000 s.f. for an empty nester couple and their cat?!
But it was “affordable” and made them feel like “they’d made it” in life.
Hopefully something less bubble-inducing will be the new “status” measurement tool. It’s looking like the experience economy could take over — which hopefully will not create many or large irrational bubbles of its own.
March 2nd, 2009 at 1:10 pm
They key to home equity for us boomers, is when, and where you bought. If you bought in the eighties or earlier, and located on one of the coasts, then there is some paper loss, but essentially you will have still made substantial money….An older person from a European noble family (not that it matters) once told me that in the future, (this was probably in the early eighties), that luxury , or status, would be “quiet”, and “space”. At the time I thought she was crazy, but she may have been on to something, everyone wants a peaceful and quiet space now, and it really is a luxury.
March 2nd, 2009 at 4:28 pm
Move to Maricopa, Arizona. They’re selling new 4BR, 2000+ s.f. homes for $80k (as seen in a link from the WSJ that Richard had last week).
I imagine that similar deals can be had in Vegas and Florida.
Housing is a zero sum game. Someone’s loss is someone else’s gain.
30 years ago, retirement meant packing up and moving to someplace cheap, usually Florida. It has only been the last decade or so that retirees could afford not to move.
That WSJ article on Maricopa gave me a lot of hope. At least my nearing retirement parents won’t have to move in with me!
And Arizona, Florida, and Nevada don’t have income taxes, either. Get a job, gramps!
March 3rd, 2009 at 6:29 am
Arizona does have an income tax. Wrong. As for Gramps getting a job, obviously this is a case of compassionate conservatism on your part.
Meh.
I doubt the American dream is over. But the American dream has been that you can afford your own place and do better than your parents, not that you can do better than everyone else around you, live like a zillionaire, and he who dies with the most toys wins, although that’s what we’ve mutated it into the last few decades.
March 4th, 2009 at 11:10 am
I wandered how Social Security would withstand all the boomers coming to the trough, and now we have the answer – they won’t (at least not as soon as they thought). Lots of boomers are going to have to continue working and hold off on that move to Florida
October 13th, 2009 at 11:55 am
[...] version or the whole gold-watch-and-goodbye thing, I would argue not. First, consider all of the dwindled “retirement” funds. You bet we’ll see people working longer than originally planned. And that’s okay, [...]