The Baby Boomers Retirement Blog

Lately quite often during discussions with my clients about the retirement perspectives of the Baby Boomers I hear a question like this: Is the looming pension crisis of the Baby Boomers related to the recent financial meltdown? My answer is always no, and here is why.

The visible signs of the financial crisis we are going through started to show up just at the end of last summer and then during the fall of 2008. (The root causes have been present much earlier, but now we will skip the analysis of the credit crunch…) On the other hand, the signs — the writing on the wall, if you wish — telling about the pension gap threatening the Baby Boomers were obvious for quite a while. I mean years!

There were studies off and on-line, books, papers written about it, we just didn’t want to hear them. Of course, the present crisis didn’t help: it made things even worse but the real problem started way earlier. I explained it in more details in my Pension Report, which you can download from this site but here is the brief version of it:

There is not enough money in the pension systems. What you need to know about the state/government run pension systems like the Social Security in the US or the Canada Pension Plan in Canada or the National Insurance in the UK… they are all so-called pay as you go systems. What does that mean? It means that the active workers contribute from their income (salaries and wages) to the “pool” this month and next month the government will pay out the retirement income (pension) to retirees.
Now, the catch is in the proportion of active earners related to the number of the retired population. It is a very easy math.

Let’s say in a healthy population structure 3 or 4 active workers pay into the pension fund for one (1) retired person. That is exactly how these pension systems were devised. And it worked well as long as the population was growing. So, when is the population growing? Simply put, when every couple has more than two children. If they have only two — the population will stagnate. If less, the population is shrinking.

In most of the Western countries the population is not growing in the healthy way described above. Many analysts blame the Baby Boomer generation for their selfishness: allegedly, for their own convenience they didn’t “make” enough children to secure their own financial future. Some people call us the most selfish generation in the history. I admit this statement is open to debate, and I will have a post dedicated just to this issue, however, I would like to ask for your comments about the pension gap and the Baby Boomers reproduction rate.

What do you think?

About the author

Istvan Horvath is an author, blogger, former journalist, a passionate advocate of the Baby Boomers, and the founder of DigitalPensionCom. He is writing extensively about the Baby Boomers' retirement and pension issues. His Pension Report is an eye-opener. Visit his Baby Boomer Pension Blog for more articles. This article can be reprinted or republished provided the content and links are left intact, and the "about the author" section is included.