Retirement Assets Drop - How Will Baby Boomers Ever Retire?

by: Andrew Corn

Life Expectancy Had Better Increase

This post outlines the sad state of retirement savings in the US. The worst part of this story is that the most recent data posted by the Investment Company Institute (a self serving lobbying and public information consortium of the mutual fund industry) is nearly five months old and the market has been let us say “unforgiving” since then, even to the best of managers.

Many people are going to have to live and work longer. As of 9/30/08, (the most recent stats date) total retirement assets in the U.S. dropped by more than $2 trillion to $15.9 trillion in combined pension, defined contribution, individual retirement account and annuity assets. This represents an 11% decline from the $18 trillion held in retirement accounts at the end of September 2007. This includes contributions over the year and investment classes ranging from cash, stock and bonds and alternatives such as hedge funds.

Most of the drop occurred due to falling markets, secondarily due to slower or stopped contributions in IRAs and slower annuity sales. The stats breakdown like this:

  • IRAs assets dropped by 17% to $4.1 trillion
  • Annuity assets, meanwhile, fell 6%
  • Defined contribution plans dropped 11%
  • Pension assets declined by 12%

The grim news continues as the adjusted close back on the day this data was set (9/30/08) the S&P 500 closed at 1164.74, and it closed on Tuesday of last week at 743.33, so yes, this picture is materially uglier.

So where specifically are the shortfalls? How will most of the baby boom generation ever retire? Must we all live and work forever?

As a CIO I search for ways that institutions and investors can begin to pick up the pieces and work towards attaining modest goals.

My three to six month market outlook is not overly optimistic. Then again, I am not retiring in that time frame, and for those who are retiring or already have retired, few if any of you require the bulk of your investment pool in such a short time horizon.

We all know the only way to achieve our financial goals is by having a solid plan, thoughtful asset allocation and remaining true to your investment process.

How many of us really plan, execute and adjust?

To me this is a very serious goal. It is about the American dream; a better life for our children, safe clean neighborhoods and yes, a secure retirement.

I usually calculate and estimate, I rarely hope. In this case, I hope the government (both sides of the aisle – are you listening?) reaches out to us, the people, and they remember for who and what they are working, and does the right thing.

We too must do our part, take responsibility, seek help and guidance or invest the proper amount of time to plan and achieve our own destiny.

My firm provides such guidance for institutions and individuals. The firm also publishes indexes tracked by ETFs and UITs for the do-it-yourself types.

My blog is intended to provide some insights, perspective and specific investing ideas as my old blog Clearam Ideas did.

These are serious times requiring serious strategies. May we all live long, and prosper.