Editorials

Boomers postpone retirement April 7, 2008 - No reporter cited

The headline in Sunday’s Democrat-Gazette reads: “Many postpone retirement as assets swoon.”

The story, reprinted from the Wall Street Journal, makes the point that aspiring retirees have been hit by declining stock portfolios and a freeze-up in the real estate market, from which they had hoped to reap a windfall by selling investment houses.

The plight of Dick Boice, a 59-year-old IBM employee, is used in the piece to illustrate the problem. Boice and his wife planned to sell their Kansas City, Mo. home for $390,000 and use the proceeds to supplement his retirement.

Meanwhile Boice’s 401 (k) and retirement funds have fallen by roughly 20 percent to a combined $240,000. The Boices have cut the asking price of their home by $40,000 and postponed retirement for a couple of years, according to the article.

What people seem to forget is that what goes up can go down. Stocks that go up 20 percent can decline by even greater amounts. The same goes for investment property. The next shoe to fall in real estate will be commercial real estate.

The Boices are not alone. Another interesting aspect of the article is that the percentage of workers age 55 to 64 rose to almost 65 percent of the workforce, up a percentage and a half.

In my view, we are in a recession and probably will remain in one for about a year and a half. The federal government and the Federal Reserve have opened the money supply spigots to full throttle to mitigate the deflationary impacts of the declining real estate market, rising unemployment, and falling real wages.

What this means to you is falling interest rates, higher prices for fuel and groceries, rising utility costs, and a declining standard of living.

The talking heads on television are freely using the “r” word, but so far we have heard the “d” word only once. The Great Depression is mostly forgotten and the lessons of the past remain unlearned. One talking head on a financial show casually mentioned that the recent purchase of Bear Stearns by the Fed was necessary because another firm held $97 trillion in derivatives and there was fear the credit markets would freeze up.

Huh? We don’t even know what derivatives are and $97 trillion sounds like a lot of money.

The Depression was caused by too much debt and when the collapse came it had a domino effect throughout the economy.

Can it happen again? No, the experts say. Actually, the next depression is inevitable.

How can you protect yourself? Pay off your credit card debt, keep your job, and hang on.

At the end of the day, all debts must be paid and some day a heavily indebted society living beyond its means will have to pay the piper.

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