The Baby-Boomer Money Problem

“Our seniors’ retirement should never rely on the bull of political promises or the bear of the market.” –  Barbara Mikulski

Recently, ETR reader Chris Collier wrote me the following e-mail:

Dear Mr. Masterson,

“You are always talking about starting to invest and accumulate savings for retirement in one’s twenties and thirties. I don’t recall your writing about those of us who were either not smart enough or, for various reasons, were unable to start saving early. We find ourselves in our early fifties with little or no savings and no financial retirement plans. I suspect many other baby boomers are in this same situation. Many of us have two-income families, children in college or about to be in college, and a small amount of what would be considered ‘extra’ money each month.

“With concerns about the future of Social Security in mind, what can we do other than hope our kids are able to take care of us in our old age?”

Here’s my response to Chris – and everyone else in that same (very common) situation …

In fact, I frequently address the financial concerns of baby boomers. I do it all the time in ETR.

What I haven’t done yet is address the subject in book form. My previous two books on wealth building, Automatic Wealth and Automatic Wealth for Grads… and Anyone Else Just Starting Out, were written with a younger audience in mind.

The baby boomers range from roughly 50 to 60. After protesting the Vietnam War in the 60s and finding themselves in the 70s, they got to work seriously in the 80s – which has meant the normal 44-year earning career has been severely truncated for them.

My work history is typical. I graduated high school on Long Island in 1968. For the next five years, I did double-duty, working and studying on a full-time basis. I worked as a roofer, housepainter, bartender, and pool installer while earning a bachelor’s degree in liberal arts.

The next year, K and I moved to Michigan, where I worked triple shifts – going to classes in the morning, working as an assistant teacher in the afternoons, managing a restaurant at nights, and working as a carpenter on weekends. It took me three years to earn a master’s degree in English and American Literature.

After a brief stint in the bar business back on Long Island, K and I headed off to Chad, where I spent two years teaching English literature and philosophy to French-speaking Africans. It wasn’t until shortly after we returned from Africa, in 1978, that I got my first “real” (i.e., career-oriented) job as a researcher and junior writer for a Washington-based newsletter publishing company that specialized in international business.

At the same time, I pursued a Ph.D. After four years of working full-time, teaching part-time, and attending classes, I finished the required coursework for my doctorate and began preparing for my dissertation.

About that time, K and I had the opportunity to visit her brother, who had a job renting jet-skis in Key Largo. To make the trip tax-deductible, I scheduled three job interviews along the way – two at Florida newspapers and one at a private newsletter publishing company.

I wasn’t really looking for a job. My plan was to finish my dissertation and see if I liked university teaching. But I did the interviews … and by the time I arrived in Key Largo, I had three job offers waiting for me.

I took the job at the newsletter … and, a year after beginning the job, I decided to get serious about my career and start making money.

I was 33 at the time and 12 years out of college. Six years later, at the age of 39, I sold my business and “retired” for the first time.

Many baby boomers had a similarly inauspicious beginning. Most of my high school friends went to Vietnam or dropped out of college. And of those who finished, most bounced around, like I did, from one “interesting” job to another.

We baby boomers were early dreamers but late bloomers. We graduated high school with all sorts of world-changing ideas but put few of them into practice. Worse, we grew up thinking that all we needed was love. With children, mortgages, doctor bills, and diapers to deal with, we were already well behind the financial eight ball.

Most began working earnestly about the same time I did – in the early 1980s. But few of us went into business on our own. Instead, the majority became professionals (doctors, dentists, lawyers) or employees (executives, engineers, accountants, etc.). We worked loyally and hard. And gradually, over time, we were able to improve our lifestyles and save a modest amount of money.

For a while – in the 1990s – we were doing so well in the stock market that we felt confident about an early retirement. But then the tech bubble burst and most of us got creamed. And most of those who didn’t lose money in stocks invested in real estate, and are now feeling the strain of seeing that market self-destruct.

Which brings me back to Chris and his question.

Chris is in his mid-fifties. And although he (and his spouse) have been working hard for so many years, he’s certain he doesn’t have enough money to retire on. Well, Chris is not alone.

If I were to take a poll of the people I worked with at my first publishing job in 1978, I’m sure I’d find that many fit the following baby-boomer profile:

Age: 55 Personal Income: $75,000 Family Income: $125,000 Number of Hours Worked Every Week: 51 Number of Hours Spent at Leisure: 11 Stock Holdings (including company pension): $125,000 Bond Holdings: $80,000 Equity in Home: $170,000 Other personal property: $30,000 Total Family Net Worth: $400,000

If you, like Chris, fit this profile, cheer up. There is plenty you can do to make more money, enjoy a great lifestyle, and retire comfortably well before you turn 90. In fact, my next book, Seven Years to Seven Figures, is aimed at baby boomers who aren’t already rich and who don’t want to have to change their lifestyles or keep on working as they enter their 60s and 70s.

I won’t give away the book’s wealth-building formula before it’s published. But I can say that if you are 50 to 60 years old right now and haven’t yet acquired a multimillion-dollar net worth, you won’t get one by finding the next new investment bubble.

Between now and the time you are 75, you can expect to make:

no more than 8 percent a year on stocks

no more than 4 percent a year on real estate

no more than 5 percent on precious metals

no more than 6 percent on natural-resource investments

These four predictions are not the result of any major studies or complicated computer programs. They are my best guesses about what will happen in the near future based on what I’ve seen in the recent past. Maybe I’ll be right. Maybe I’ll be wrong. If I’m right, you can see that you won’t be able to achieve any sort of financial independence through conventional means.

Which brings us back to Seven Years to Seven Figures.

In planning the book, I set myself a challenge to create a program that can deliver million-dollar fortunes in under 10 years. At first, I worried that I had gotten myself into a bad situation by agreeing to accomplish a seemingly impossible goal. But the more I thought about it, the more I realized that I knew how to do it. After all, I had done it myself.

And when I thought about how long it took me to make each of the million-dollar fortunes I’ve earned, I realized that none of them took longer than seven years. Most of them, in fact, took three or four years. This is something to keep in mind as you read the book: The strategies that I suggest – though designed to work for you in seven years – may do better than that.

Today’s Action Plan: You’ll be able to get my specific ideas about how to get rich quickly when the book is published this autumn. In the meantime, keep reading ETR for ideas on what you can do now to enhance your lifestyle and make more money.

[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]