Baby Boomer Bubble Trouble

[legion]

From '98 - 2000 we had the Dot Com bubble.

From 2004 - 2007 we had the RE bubble.

I propose a theory. The baby boomer generation is nearing retirement, they haven't saved enough, and they are chasing every upside trend in a sort of get-rich-quick scheme.

I predict the next "bubble" will be in commodity prices. Oil, corn, and gold specifically, maybe others. I think oil prices are going to be kept artificially high in overreaction to every Atlantic storm and every geo-political crisis--real or imagined. Because oil prices are high, we will need an alternate fuel: ethanol. So corn prices will stay high. Gold? It always goes up when people are jittery about the economy. I think the next thing the pundits will be pushing is a bad economy because of oil prices/dependence on foreign oil. Corn is our saviour. Gold is our refuge.

Of course, this will be just another house of cards.

[thrown_hammer]

Don't overlook knee and hip replacements.

[David]

I'm just hoping when the baby boomers start to die off (not that I wish bad will on them mind you) that the retirement homes in nice locations become affordable in time for my retirement in 10 or 20 years.

[The Gaijin]

Feed them Soylent Green. Or feedstock them into Soylent Green.

[Dixie]

I predict the next "bubble" will be in commodity prices.

I disagree. It will be the, "Hey, you haven't paid taxes on that 401k", bubble. Expect to see taxes jump, and I do mean jump, to cover boomers.

I'm a tail-end boomer. And I'm investing a fair portion of my after tax income.

[red-beard]

The advantage of the regular IRA and the 401K is you pay taxes when you take it out. The problem with the ROTH IRA is that you already paid taxes, but through legislative action, you might pay taxes again.

I do not trust our elightened elected officials to keep their grubby hands off my money.

[RoninLB]

The elderly have the highest % of their group voting. College students have about the lowest.

The teachers unions now have veto control of DNC state issues. They will soon be replaced by the AARP.

[strupgolf]

Red-beard, you are so right. Elected officials will ALWAYS find ways to find more money for all those programs they think up. I'm nearing retirement, in less than 10 years, and I just find it so hard that the gov't is always taxing us to the max. I dont have an answer, but I hope one is found because we will all be in a s-##$ pit if it's not fixed soon.

[Moses]

Originally posted by Capt. Carrera
I disagree. It will be the, "Hey, you haven't paid taxes on that 401k", bubble.

Absolutely.

The buzzwords of the next decade will be "needs testing". If your income is too high or you have saved too well, your "tax-free" retirement will become taxable. A heavy Medicare "contribution" for those retired folks who can afford it. Social Security benefits will be adjusted downward based on a wealth index.

"Needs testing". Get used to it.

[red-beard]

Originally posted by strupgolf
Red-beard, you are so right. Elected officials will ALWAYS find ways to find more money for all those programs they think up. I'm nearing retirement, in less than 10 years, and I just find it so hard that the gov't is always taxing us to the max. I dont have an answer, but I hope one is found because we will all be in a s-##$ pit if it's not fixed soon.

The answer is simply spend less. We as a people need to decide what is and isn't necessary spending. Unfortunately, neither party seems capable of this.

[strupgolf]

I live within my means. I have a good job, good wife, good house, but I cant seem to find the means to help everybody out when they have problems. I live in a small town, and every time I see a person " out of means", it seems to be that they have the "means", they refuse to use them. They rely on the Gov't to help them out. WE CANT HELP ALL PEOPLE OUT OF ALL PROBLEMS. I just hope that I can retire and enjoy, but with all the "boomers", there is just so much money to go around.

[Bob Hancock]

As a first year baby boomer, may I take this opportunity to thank all you young folks for your generosity in making the most recent motorcycle I bought possible. I'll be safe as safe can be so that you can buy me another one in a few more years.

[74-911]

Originally posted by Capt. Carrera
I disagree. It will be the, "Hey, you haven't paid taxes on that 401k", bubble. Expect to see taxes jump, and I do mean jump, to cover boomers.
I'm a tail-end boomer. And I'm investing a fair portion of my after tax income.

As a leading-edge boomer (1946) and retired, I will probably pay more income tax when I start withdrawing from my IRA/401K's as I did when working. If you have any income at all, your social security will also be heavily taxed as our ever greedy legislators neglected to index the threshold when they started making social security benefits taxable back in the early 80's.

A Roth IRA would have been much better in my case but we were always over the income threshold and as someone stated, there is no guarantee they won't come after Roth's eventually.

Capt. C has it right, sock a good portion of your after tax income away, don't depend just on qualified plans.

The reality is, your tax problems may get worse when you retire if you diligently saved for your retirement. There is no "tax free" retirement.

[David]

I thought this was an interesting article on the "get the tax break now or later" issue: http://biz.yahoo.com/cbsm/070404/9d5e5d651d1d4c91bddec37fcfba4e78.html?.v=1&.pf=one click

Here's an excerpt from the article that sums is up:

Yes, there are some experts (and regular Americans as well) who say that tax rates are historically low and are likely to rise over time. And given that prediction, the experts say workers should give up the current tax deduction in the hopes that tax rates will be higher later on.

"That is what I call a dumb solution," wrote Starr in the Journal of Pension Benefits. "The (worker) has to give up a sure thing (the current deduction) for what is just a chance that the future benefit will be more valuable -- dumb move, if you ask me."

[john70t]

Ahhh, soon.
Another 4 years of a Democrat president inheriting another massive deficit from years of Republican porkbarrel projects......

....and coincidentally, big-government spending is a fashionable cocktail conversation topic again.

[Moneyguy1]

Not to worry...

The system is self correcting. In the near future, people will not be able to afford a conventional retirement, what with defined benefit pension systems going the way of the dodo, medical costs double digiting every year, etc. So, these folks will have to continue to work, and will be well qualified to work the "service industry" jobs provided by the big box retailers, hawking foreign produced goods.

LIke I said; Not to worry.....

[The Gaijin]

If you are living 30 years longer than your grandparents did - you should not expect the "conventional retirement" they had.

[teenerted1]

Originally posted by The Gaijin
If you are living 30 years longer than your grandparen'ts did - you should not expect the "conventional retirement" they had.

for me thats a loaded question
both my grandfathers died long before retirement, and both my grandmothers lived well into their eighties

its my folks that are doing well in their retirement
getting both a pension and SS. retirement home is paid off too.
medical bills aren't too bad yet.

but dad got the shaft last year when the state finally realized the had built on their property and were living there. they have 5years of property tax the state wasn't collecting on.

[Moneyguy1]

No one knows the length of the thread of life.

However, that being said, one must plan for the "best case".

So; I offer the following site for retirement planning:

www.fpanet.org and click on the link to the Journal of Financial Planning on the top righthand corner.

In brief, one must consider the following: The guidelines aim to replace 80 percent of the net-adjusted income in inflation-adjusted dollars, assuming retirement at age 65.

As an example: If youy make $60,000 a year and save $6,000 for retirement, you are living on $54,000. Therefore, you would need $43,200 or 80% of $54,000 in retirement, not the larger 80% of $60,000. In other words, the more you save, the less you need to save.

Timing is everything. If you are, say, 30, make $40,000 a year and have no retirement savings, you need to start saving 10% of your income. But, if you already have $20,000 salted away, 8.4% would be sufficient. If you are 30, making $80,000 and have no savings, 13.6% would be required. But if you are only earning $20,000, 7% is recommended because Social Security is more heavily weighted for lower income earners.

Like I said, timing is everything. If you are 35 and making $60,000 a year with no savings to date, you need to salt away 14.6%. Wait until you are 55 and that jumps to 32%. At that point, delaying retirement may be the only option.

Excerpts from an article by Humberto Cruz; Tribune Media Services