Friday, May 28, 2010
Monday, May 24, 2010
Some question whether the boomer generation has lost most of their savings in this recession. The new brief by The Center for Retirement Research at Boston College, Return on 401(k) Assets by Cohort (March 2010, Number 10-6) report that early baby boomers, those born between 1944 and 1950, may have already recovered up to nearly half of the $1 trillion or so that were lost in the recent recession. While those with balanced portfolios may have fully recovered.
The cohort at the greatest risk appears to be the Late Boomers, who have experienced a less favorable investment environment over their careers and will need extraordinary returns just to end up as well off as the Early Boomers are today. Generation Xers, given their shorter careers, have faced the worst environment, but they have more time to catch up.
The center analyzed the potential returns and losses sustained by IRAs and 401K plans by ten-year age cohort. The matrix of internal rate of return on lifetime contributions showed how your 401(k) or IRA would look at the time you actually retired.
To see the full brief, visit the Center web site.
The problem with the retired Boomers (and their retirement savings) stem from the fact that they are on a fixed income and they stop contributing to their retirement accounts. They lost the ability to maintain their standard of living after they stop working, and they were not able to adjust their lifestyle and spending habits. The time frame from the peak of the market in 2007 to the trough in March 2009 and up to 2010, these Early Boomers have lost a lot of money as well as the ability to replenish their retirement funds. They have also lost the ability to be able to take advantages of current opportunity for these long term investments such as stocks and real estate.