10 things baby boomers won’t tell you

10 things baby boomers won’t tell you

The aging Me generation is still putting itself first

By Catey Hill

1. “Paws off, Junior. This cash is mine.”

Children of boomer parents shouldn’t expect a big inheritance, even if their parents are rich. Only about half of high-net-worth baby boomers — those with more than $3 million in investible assets — say they consider leaving money to their kids a priority, according to a 2012 U.S. Trust Survey. In contrast, nearly three-quarters of people older than boomers say it’s important to them.

Even boomers — typically defined by demographers as those born between 1946 and 1964 — who do plan to leave an inheritance may do so with strings attached. Indeed, nearly seven in 10 high-net-worth boomers surveyed by U.S. Trust said they were not fully confident that their children could handle an inheritance.

“More often than not, clients leave inheritances in trusts,” says John Olivieri, a partner at New York law firm White & Case who works with a lot of boomer clients. With a trust, a third party manages the money and doles it out at intervals that the parent has specified. “Some parents have concerns about how their kids would invest and spend the money,” Olivieri says.

2. “Make room, kids. We’ll be living with you when we’re old...”

Boomers are expected to live longer than any previous generation. At the same time, many haven’t saved nearly enough for retirement. More than 44% of early boomers (whom the Employee Benefit Research Institute defines as those born between 1948 and 1954) and 43% of late boomers (born between 1955 and 1964) may not be able to afford basic living expenses in retirement, according to a 2012 analysis by EBRI. The result? Kids could be supporting mom and dad well into their 80s and 90s.

Health-care costs, not income, a retirement crisis

Employee Benefit Research Institute CEO Dallas Salisbury says health care costs are the ticking time bomb for American retirees.

One of the biggest drains on boomer retirement savings will be health-care expenses. Medicare pays for only about 60% of the cost of health services the typical retiree will face, estimates EBRI. A couple that is 65 today might need nearly $300,000 to cover health costs. “People who haven’t saved enough for health-care costs may deplete their assets,” says Michael Markiewicz, a partner at New York-based Fogel Neale Partners. “A lot of them may have to live with their kids or depend on them for money and care.”

If parents do move in, their kids should expect to spend an extra $6,000 to $10,000 annually on food, clothing and other basics, says Andy Cohen, CEO of Caring.com, a website that provides resources for caregivers. Add thousands more for big-ticket items like wheelchair ramps or home health-care aids. Expensive as that sounds, it’s still often less than what it would cost to move a parent into an assisted living community, about $42,600 per year, on average, according to 2012 data from the MetLife Mature Market Institute. 

3. “...and we blame you for that.”

Nearly one in six people ages 45 to 64 say that paying for their kid’s college tuition got in the way of saving for their own retirement, compared with just one in 20 who say that buying a home did, according to a 2012 study from Capital One ShareBuilder.

That’s not surprising, given that the typical middle-income family will spend more than $230,000 to raise a child from birth to age 18, up 23% (in today’s dollars) since 1960, according to data from the U.S. Department of Agriculture. When you add paying for college to the mix — for tuition, fees and room and board as of the 2012-2013 school year, you’d pay an average of $17,860 per year for a four-year in-state public school, $30,911 per year for a four-year public out-of-state school or $39,518 per year for a private four-year school, according to the College Board — you could easily spend upwards of $100,000 on the basic’s for your child’s education. This means that retirement savings can really take a hit. “A lot of parents prioritized saving for their kids’ college over saving for retirement,” says Dan Greenshields, the president of CapitalOne ShareBuilder.

The reason? “Parents often equate paying for college with helping their child become successful in life,” says Deborah Fox, the founder of Fox College Funding, a San Diego-based college-funding consulting firm. That’s something they feel they have a duty to do, whether or not they can afford it, she adds. 

4. “We can’t face reality.”

What boomers think retirement will be like and what it actually is like are two very different things. A case in point: The forever-young generation just can’t deal with the idea of growing old. Only 13% of pre-retirees (people over 50 who have not yet retired) think their health will be significantly worse in retirement than it is now, while 39% of retirees report that it actually is worse, according to 2011 research by the Robert Wood Johnson Foundation and the Harvard School of Public Health.

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Boomers are a little fuzzy on the financial realities as well. While only 22% of pre-retirees think their financial situation will be worse in retirement, roughly one-third of retirees say that it is worse. Along those same lines, only 14% of pre-retirees predict that life overall will be worse when they retire, but a quarter of retirees report that it actually is worse. “There’s a real disconnect because your life pre-retirement is much different than your life post-retirement,” says Hal Hershfield, a professor at NYU’s Stern School of Business who conducts research on judgment, decision-making and social psychology with an emphasis on how thinking about time can alter decisions and emotions.

5. “ ‘Til death do us part’ doesn’t apply to us.”

Boomers are untying the knot at a record pace. The divorce rate for people over 50 has doubled in the past 20 years, says the National Center for Family and Marriage Research at Bowling Green State University, compared with a slight decrease in divorce overall. More than 600,000 individuals over 50 divorced in 2009, and if the rate continues to grow at the current pace, that number will hit more than 800,000 by 2030.

What’s fueling this trend? Empty nesters find they are a lot less compatible when the kids aren’t around is one phenomenon, says Toronto-based psychologist Tami Kulbatski. Another might be that boomers are more likely to have married young (boomers were far more likely to be married when they were between the ages of 18 and 30, than were members of Generation X, according to research from the Pew Research Center for People & the Press). Now, a lot of boomers are in their second, third or even fourth marriage, and these marriages are more likely to end in divorce, says Krista Kay Payne, a researcher at the center.

Divorce will likely take a chunk out of the average boomer’s already inadequate retirement funds. Lawyers’ fees alone can range from a couple of thousand to tens of thousands of dollars or more, says attorney Jeff Landers, author of “Divorce: Think Financially, Not Emotionally: What Women Need to Know About Securing Their Financial Future Before, During and After Divorce.” Add to that things like alimony and having to split up assets, and boomers’ financial picture gets even murkier.

6. “We’re unhappy ...”

Boomers are the least happy of all age groups, according to a 2008 study published in the American Sociological Review journal. “The generation as a group was so large, and their expectations were so great,” Yang Yang, the author of the study, told the American Sociological Association, “not everyone in the group could get what he or she wanted due to competition for opportunities.“

Another report from the Pew Research Center came to a similar conclusion: On a scale of one to 10, boomers, on average, rate their lives a 6.2, compared with a 6.7 for older adults and 6.5 for younger adults. That may not look like much of a difference, but this pattern has held steady for the past two decades. In other words, the boomers — even when they were younger — have been consistently less happy than other generations for the past 20 years.

7. “... and we eat our feelings.”

Nearly 40% of people ages 60 and up and nearly 37% of people 40 to 59 are now considered obese, according to a 2012 report from the Centers for Disease Control, compared with less than one in three for people age 20 to 39. What’s more, baby boomers are fatter than their parents’ generation, according to a study released this year by JAMA Internal Medicine, with nearly 40% of boomers reportedly obese, versus 29% of the previous generation.

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Obesity can lead to serious health problems, including diabetes and heart disease. A 65-year-old person who has been obese since age 45 personally incurs roughly $50,000 more in Medicare costs over the course of his or her lifetime than a “normal weight” 65-year-old does, according to the National Center for Health Statistics. Medicare and Medicaid end up paying for roughly half of the cost of obesity, which accounts for $190 billion in medical spending annually, according to a 2012 study published in the Journal of Health Economics.

8. “And we’re addicts.”

Maybe it’s because so many grew up in the ’60s, but whatever the excuse, boomers are drinking and drugging their way into old age at a rate much higher than their parents’ generation. The number of people 50 and over who were admitted to substance abuse treatment programs increased 136% between 1992 and 2010, according to the latest data from the Substance Abuse and Mental Health Services Administration.

Alcohol is the most common reason that boomers seek treatment, but the proportion of admissions of people over 50 for heroin abuse nearly doubled and for cocaine use more than tripled over that period. “Because of the magnitude of these changes and their potential impact, it is increasingly important to understand and plan for the health care needs, including the substance use prevention and treatment needs, of this population,” the administration writes.

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Treatment doesn’t come cheap. According to the Substance Abuse and Mental Health Services Administration, the mean cost per admission for outpatient substance abuse treatment is more than $1,400 without methadone (a synthetic opioid used to treat heroin and morphine addictions) or $7,415 with it; prices can run into the tens of thousands for inpatient treatment. What’s more, Medicare will only pay about 65% of an outpatient treatment program, and it will pay for inpatient treatment only if a doctor deems it “medically necessary” and the care is in a hospital. (Medicare doesn’t fund treatment at those designer “rehab spas.” Sorry, boomers.)

9. “We will bury you in debt.”

We’re a nation in record debt — an estimated $16 trillion — and the sheer number of boomers is expected to significantly add to that in the coming years, as more begin to receive Social Security and Medicare benefits. (Social Security and Medicare spending represented 38% of federal expenditures in fiscal year 2012, and “both programs will experience cost growth substantially in excess of GDP growth through the mid-2030s,” according to the Social Security Administration.)

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But in many ways, boomers have been less willing than other demographic groups to support policy changes that could trim the debt. Fully 68% of boomers oppose eliminating the tax deduction for interest paid on home mortgages, compared with just 56% of all adults, according to the Pew Research Center. Furthermore, 80% of boomers (vs. 72% of all adults) oppose taxing employer health insurance benefits and 63% of boomers (vs. 58% of all adults) oppose increasing the age one qualifies for full Social Security benefits, the study shows.

Many boomers are more opposed to these plans because “they would feel the impact more than other groups,” says Kim Parker, the associate director of the Pew Research Center’s Social and Demographic Trends Project. But without some sort of deficit reduction, future generations will be left with the dire economic consequences a massive deficit can cause, she says.

10. “We’re obsessed with (not) aging.”

Sagging skin, crows’ feet, a dull complexion — these used to be the inevitable signs of aging. But if the boomers have anything to say about it, that’s going to change. Revenue for so-called cosmeceutical companies — which manufacture cosmetics with pharmaceutical capabilities, some of the most popular being wrinkle-reducing moisturizers and creams that even skin tone — is expected to hit $5 billion this year and is expected to grow 7.5% each year through 2018, according to data from market research firm IbisWorld; people over 50 account for more of cosmeceutical companies’ consumers than any other age group.

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And it’s not just lotions and serums that they’re into. People 51 and up had 24% of all surgical cosmetic procedures, like face-lifts and tummy tucks, and 30% of all cosmetic “minimally invasive” procedures like cellulite treatments, Botox injections and laser hair removals, in 2012.

It also appears that boomer men are one of the fastest-growing segments of the population going under the knife. While overall cosmetic procedures in men increased just 9% in 2012 compared with 2011, face lifts, which are typically performed on the over-50 set, increased 21%, according to data from the American Society of Aesthetic Plastic Surgery. And this will become more popular, says Jack Fisher, the president of the society, as many boomers want to look and feel young.

George Lagarde

ReverseMortgageLV.com

GLagarde@AllWestern.com