The Happy Story of Boomers Retiring on Their Generational Wealth Is Wrong

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

 This happy story is wrong on multiple counts.

The conventional view of the Baby Boomers' retirement is a happy story: since we're living longer and remaining productive longer, Boomers will not be as much of a burden on Gen-X and Gen-Y as doom-and-gloomers assume.

Not only are Boomers staying productive longer, they will draw upon their vast generational wealth as they age, limiting the financial burden on younger generations.

This happy story is nicely summarized in this lengthy piece The Fear Factor: Long-held predictions of economic chaos as baby boomers grow old are based on formulas that are just plain wrong.

In this view, the only thing needed to prop up Social Security for the rest of the 21st century is a higher tax on high-income earners, in effect moving the limit on earned income exposed to Social Security taxes from about $114,000 to $217,000.

This happy story is wrong on multiple counts. Let's start with the most egregious errors:

1. It ignores the End of Work and the decline of full-time jobs

2. It ignores the Elephants in the Room, Medicare and Medicaid

3. It ignores the inconvenient reality that there is nobody to buy the Boomers' overpriced stocks, bonds and homes when they start to unload them

Put another way: the happy story ignores the changing nature of work and jobs, the unsustainable cost trajectory of Sickcare (a.k.a. healthcare) and the inability of Gen-X and Gen-Y to buy Boomer assets at bubble valuations. Take these factors into minimal consideration and the claim that 76 million people (out of 316 million) can retire with no negative repercussions falls completely apart.

1. The end of work and changing nature of jobs: I have covered this for many years, most recently in a program with Gordon Long: The New Nature of Work: Jobs, Occupations & Careers (25 minutes, YouTube).

Insert end of work in the custom search box on this site and you'll get 10 pages of articles published here on that topic. For example:

Global Reality: Surplus of Labor, Scarcity of Paid Work (May 7, 2012)

The reality is sobering: 57 million people draw Social Security benefits, tens of millions more draw Medicaid, Section 8 housing credits, etc., and full-time jobs number 118 million:

The Good And The Not- So-Good News About US Jobs In One Chart (Zero Hedge)

That's a ratio of roughly two workers for every retiree and considerably less than that for workers to the total number of government dependents. As the Baby Boom retires en masse, if full-time jobs don't rise as dramatically as the number of retirees, the system fails.

The happy story repeats the usual falsehood that Social Security has a Trust Fund it can draw down. This is a falsehood because the Trust Fund is fiction: when Social Security runs a deficit, the Treasury funds it by selling Treasury bonds, the same way it funds any other deficit spending. If the Treasury can't sell bonds, the phantom nature of the Trust Fund will be revealed.

2. Everyone who looks at numbers rather than fictional claims knows the intractable problem is Medicare and Medicaid. In Sickcare, there are no real limits on cost, and so every attempt to impose cost discipline fails or triggers blowback.

Here is Medicare's twin for under-age-65 care for low-income households, Medicaid:

As I have observed for years, Obamacare and Medicare/Medicaid do not tackle the underlying problems of Sickcare costs in America. If you haven't read these analyses, please have a look:

Why "Healthcare Reform" Is Not Reform, Part I (December 28, 2009)

Why "Healthcare Reform" Is Not Reform, Part II (December 29, 2009)

That Which is Unsustainable Will Go Away: Medicare (May 16, 2012)

Obamacare is a Catastrophe That Cannot Be Fixed (December 6, 2013)

3. As I explained in The Generational Short Part 2: Who Will Boomers Sell Their Stocks To?, the Boomers' vast generational wealth will shrivel once they start selling assets en masse. The reality is neither Gen-X nor Gen-Y have the savings, income or desire to buy bubble-level assets from their elders.

This reality has been papered over for the past 5 years of super-low interest rates, which have enabled unqualified buyers to buy overpriced assets with modest income. Once the defaults start pouring in (and/or interest rates rise), the reality will become visible: you can't cash in your wealth if there are no buyers.

There are numerous other fatal flaws with the happy story that 76 million Boomers can retire on full pensions and live off their home equity and stock portfolios. Here are a few of many:

4. Pension funds based on annual returns of 7.5% will be unable to fund the promised pensions when annual returns decline to negative 5%. As John Hussman has explained, every asset bubble in effect siphons off all the future return: when the bubble finally pops, average annual returns are subpar or negative for years.

5. The ultimate buyer of all Boomer assets is presumed to be the Federal Reserve.I explain why this isn't going to happen in The Fed's Hobson's Choice: End QE and Zero-Interest Rates or Destabilize the Dollar and the Treasury Market (June 24, 2014).

6. It's presumed the Federal government can borrow as many trillions of dollars as it needs to fund retirement and social benefits as far as the eye can see. Please see the article linked above to understand why limits on the Fed's money printing and buying of governemnt bonds imposes limits on Federal borrowing.

To quote Jackson Browne: Don't think it won't happen just because it hasn't happened yet.

7. Boomers are staying productive longer and keeping their jobs longer. The reasons for this are many, but one consequence is a dearth of opportunities for Gen-Y job seekers. As full-time employment stagnates or even declines, it's a zero-sum game for the generations: every job a Boomer holds onto is one a Gen-Y applicant can't get.

A 12-hour a week low-pay part-time job will not support a wage earner or fund a retiree.

8. A Boomer who bought his home for $50,000 decades ago can live very well on $75,000 a year; it's a different story for Gen-Y. The Boomer has a low mortgage payment (presuming he didn't extract all the equity in the go-go years) and low property taxes in states with Prop-13-type limits. The Boomer who hits 65 has relatively modest medical expenses as Medicare does all the heavy lifting.

Low housing and medical expenses leave Boomers with relatively ample discretionary income. The Gen-Y wage earner who takes the same $75,000 a year job is not so fortunate. The Gen-Y wage earner is offered the Boomer's $50,000 home for $550,000, and crushing property taxes to go with the gargantuan mortgage.

The Gen-Y wage earner typically still has often-monumental student loan debt to pay off, and much higher healthcare expenses as companies offload rising Sickcare costs onto employees. Higher Social Security and Medicare taxes hit Gen-Y square in the financial solar plexus, while retiring Baby Boomers escape these taxes altogether unless they're still working.

The point is an income that offers a Boomer a middle class lifestyle does not offer a corresponding discretionary income to Gen-Yers. The entire pyramid of well-funded retirement is based on a generational continuation of massive borrowing and discretionary spending.

If that doesn't happen for structural reasons, the pyramid of well-funded retirement collapses under its own weight.

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Bollixed's picture

Que the Boomer haters who have yet to contribute but love to make noise in 3.2.1...

surf0766's picture

I have contributed much more than many of the boomers I know. So piss off

BandGap's picture

Then you should meet more of them.  I maxed out Social Security for 23 of the past 26 years. I'll never see a dime.

Ever wonder why Congress is passing legislation making reverse mortgages easier?

BlindMonkey's picture

Congratulations on winning the lottery of life.


PS. Thank you for all your contributions to the "greatest generation". The old folks aging away in Fl appreciate it.

halfasleep's picture

" can't cash in your wealth if there are no buyers." Umm.. see:Fed/Belgium?

NidStyles's picture

Yes those poor boomers. 60 years of knowing how broken this system they created is, and they want to pretend they are the greatest gift to any society.


Yes please do tell us more about how hard you worked your entire life to leave the rest of us with Mcjobs and government positions.. 

Capital is purely cumulative, and I see a lot of it having been wasted on green lawns and Hemi's even with them being aware of the mess created on their watch. That's fine though, you can pass the debt onto the next generation and ignore that it happened though. No explanations about why you let things get this bad, and you can channel the founding fathers all you want while ignoring what they and even Kennedy said.

greatbeard's picture

>> to leave the rest of us

We are required to leave you something?  What have you done to make the situation better?  Oh, that's right, you've got a bad back so you can't work hard.  Fucking boomers.



NidStyles's picture

Naw, that's right you guys were too busy leaving us a few Trillion in debt to worry about, that's alright though. Thanks for enjoying your time on Earth, now please get out of the way so the rest of humanity can fix the fucking mess you let happen on your watch.


Yeah, I can't work hard. More like I refuse to pay into this system that pays your generation for what? Screwing hundred millions of people in this country and a few billion elsewhere on the planet. Yeah go fuck yourself with that guilt trip bullshit. When you assholes start apologizing for leaving us and the next generation this mess you certainly enjoyed while you were younger then I will feel guilty about saying the things I say. Unless that happens and you realize how many kids you sent to war for oil over the past 6 decades, don't expect me to be too worried about your damn opinion... 

You knew you could have stopped this crap almost 50 years ago. 

BurningFuld's picture

You've heard of Religious wars...I now present AGE WARS! Have at her people.

NidStyles's picture

More like debt wars. This whole thing is about the moral standing of an entire generation of selfish assholes foistering a mountain of debt upon the next generation and no saying one peep of a fucking aplogy. At least my uncles have the balls to apologize for their portion of the mess.

Boris Alatovkrap's picture

Free of care retirement is potemkin lie of West, is support by rape and pillage activity of Military Industrial Complex through proxy war in other country.

NidStyles's picture

Who in the hell is talking about retirement? I'm talking about kids being born with hundreds of thousands of debt being owe by them by simply being born. 

The situation this country is in, is simply ABSURD, and it's absurd that there are people that let it get this way.

I don't care about retirement. I have already set aside my retirement, which is a gift to my children, not some fancy vacation home for me to enjoy.


I will stand and honestly say that the condition in the US is deplorable, and there is not one single reason for it.

The Baby Boomers let this crap happen on their watch, and they reaped the benefits from it, and the collapse and everything else will be foisted upon the following generations. The Millennials will pay with blood for the enjoyment the Boomers enjoyed in their time. I hope many of the Boomers understand that there will be a war fought because of their choices and actions in life, and it will be the millennials fighting that war for them. 

So have at Boomers, attack me. You know what I am saying is right though. You owe those kids and the rest of us at the very least a damn apology. It would be even better if you encouraged your other boomers to do likewise as well.


So you guys can kick the can of responsibility all you wish. I have already bled to feed you and support your lifestyle choices. I know what lies ahead for the future generations. You brought this upon yourselves, and your grandchildren will pay the price for your arrogance. 

SilverDOG's picture


Love truth based POV.


giggler321's picture

Let's be fair now, how much control over the current gov finance do you presently have, not being a boomer?  Probably zero, so was it different for them?  No, most of those goons just had their hands out when someone gave them something they thought was a gift, health care, cheap housing, jobs, whatever.  The greed of people before was and is the same as now and change will only come when ... we stop playing the game - which we are all programmed to continue playing.  I understand it is hard to not blame the people before you, but when you see, nothing that most people do, say or act has changed from generation to generation, then you can hardly blame them.


I feel this quote is most fitting, Albert Einstein, "Insanity: doing the same thing over and over again and expecting different results".

daveO's picture

If they weren't all self centered atheists(at least the ones I'm related to), they'd know selling children into slavery is as old as the bible. They are, simply, too stupid to see it. Marsha Brady never discussed this dilemma with mom or dad. We must deal accordingly. 

greatbeard's picture

>> leaving us a few Trillion in debt

Most of the debt was accured, no doubt, in your lifetime.  What have you done to prevent it?



NidStyles's picture

Certainly not buying houses that were thrown up in the derivative scheme.

I'm not pursuing get rich schemes like you. I don't take out loans, I have no credit cards. I don't even own a car anymore. I live in self-induced poverty to avoid paying taxes into the system. Tell me hero, what in the fuck have you done in your life that allows you the position to judge me personally? 

I have made more sacrifices in my short 33 years of existence than I have seen any of you do in your entire lifetime. I will not contribute to this system so that the next generation can deal with it. I will not kick the fucking can. I would rather live in poverty and debt free status than to push this shit onto my kids or someone else's kids. 


I've done more to spread the message of Austrian economics and Liberty than any single one of you that is not a part of the LvMI. Let's break out our measuring sticks here and see who is doing what with the future of humanity. I started, now it's your turn and then I will go again and so on.




ersatzteil's picture

Thanks for the martyrdom, I'm sure your kids will love growing up cash poor for such a righteous cause! Better yours than mine.

I'm not so strong in my faith...sold my soul in my mid-twenties with no regrets. My masters say "jump" and I ask "how high?" Order comes from the top down, and loyal dogs get fed the best.

You'll hit on it soon enough, likely when it comes time to lay down that nest egg. Then you'll wish you'd kicked the can.

NidStyles's picture

I am married and have kids. They are not in this country though. Only a fool would stay here and deal with this mess and eventual shitstorm.


Cultural bias or not, I've been an outcast my whole life, I see no reason to waste my good years on supporting a failed system. Especially for people who have done nothing but take advantage of less fortunates around the world and laughed at them from their tower of babel.

SilverDOG's picture




Poverty on paper, is not a life OF poverty.

You need to know the difference, if can comprehend beyond your belief.

daveO's picture

The Dem's will want to re-institute slavery when enough tax slaves wake up.

RichardParker's picture

"Poor and free" is way better than "rich and enslaved".  I've been both and prefer the latter much more.  The best would probably be "rich and free", but it nevet works out that way.

Pool Shark's picture



Why are we fighting among ourselves when we know who the real enemy is?

Since the founding of the federal reserve and the federal income tax (16th Amendment) in 1913, each generation has 'screwed' the one following it. It is only through the limitless creation of 'money' and credit (which spends just like 'money') that this was possible.

The mantra in the USA (and nearly all western countries) has become "I will gladly pay you Tuesday for a hamburger today."

If we had an honest monetary system where debts actually had to be paid in real money (not scrip, i.e., FRN's or borrowing) this could never have happened.


NidStyles's picture

Funny thing about the Federal Reserve, all of the information I have learned about it comes from the generation that brought the boomers into this world. There's a 40 year gap where no activism or social commentary on the Federal Reserve occured.

Gee, it was during the age of the Baby Boomer taking over the reins of government that this occurred. Someone dropped the fucking ball.

daveO's picture

They are trained debt slaves, programmed by the TV. I have boomer relatives who do not have original thoughts. All of their thinking has been programmed by their boob box. Some have given me grief for driving old 'beaters' while they drive 7 year car payments with a shiny emblem on front. Misery loves company, I suppose. I like to think of them when I'm driving my 'paid for' POS to the beach while they're slaving away at the office. I will not offer them help when TSHTF. Think of the Three Little Pigs. The boomers are mostly living in straw houses.

SilverDOG's picture




No doubt

Then ALL IS OWNED by the FED and friends.



One would need to be completely asleep to not see.



Shad_ow's picture

We paid the max into SS for years too but it wasn't from winning the "lottery of life."  It was from working our asses off for 30 years until the U.S. government took care of the housing industry and put us out of business. Now those imported for slave labor "immigrate" into our overburdened society and so what construction there is.   We are living off retirement savings ten years too early and what meager jobs we can get.  Thankfully we paid our bills and mortgage and do not owe anything.  We did it right and got screwed anyway.  We are better prepared than most.  Are you?


Think before you judge others.  Class and racial division is the hope of the perpetrators that you will blame anyone but them when TSHTF.

MrPalladium's picture

This talk of generational conflict is nonsense. Cut or terminate Social Security and the Boomers will have to move in with their children, and then you have the entire age spectrum angry at the system. These nonsensical discussions of generational conflict assume that boomers have no children and that gen-X and gen-Y have no parents.

Delusional nonsense. Anger at the system will be uniform across all age cohorts unless Social Security is cut or repealed only for childless boomers.

armageddon addahere's picture

How can the boomers move in with their kids when the kids moved back in with the parents or never left?

MrPalladium's picture

Exactamondo! Because we already have so many multi-generational hoseholds, once Social Security is cut both the parents and kids will have much less to live on.

Social Security cuts will have multi-generational negative impacts.

And, of course, the phony CPI will gradually repeal SS in any event. Why would our imperial masters want to make the process any more visible than it already is?

NidStyles's picture

When the SHTF, it will not matter if you think sticking together works. Society will shed the weak and feeble in an effort to perpetuate the species. The boomers had their chance to make a system that could work and survive another 5 generations, they dropped the ball in support of that "Great Society" they heard about as children.

Calmyourself's picture

Yeah, but Nid they brought us diversity and through diversity strength and through strength national unity oh yeah...

NidStyles's picture

I feel a lot of national unity talk is mainly them being aware they are leaving this debt and not wanting younger folks to be pissed off about it. 


Unity my ass, I could tell stories about how great the Boomers are. On the fronting side while they can certain turn the charm on they are just empty soulless meat bags like the rest of us waiting for salvation and unwilling to do what is required to absolve themselves of their sins. They can certainly on average blame the rest of us for being too lazy for them though. 



daveO's picture

I bumped into a boomer I know, but am not related to, wearing a t-shirt with DIVERSITY emblazoned(each letter a different color) across the front. I'm serious, they sell t-shirts like that.

bullchit's picture

You know the poor boomers, right?



jbvtme's picture

boomer here...just sold a piece of real estate last week. my wife and i rent and own two ten year old rigs with 100k plus milage. not rich.  i'm giving the proceeds of the sale to people who have worked for me over the years. one guy was a mason who worked on my house thirty years ago. haven't seen or talked to him since.  he gets $10k. another is a girl who worked in my office who had a drug problem when she left and has since straightened herself out. she gets $10k. and so on. Tyler spread some good news around.

noless's picture

Crazy, no one would ever do that for me.

Thanks for not being a complete jackass.

(this is intended as a sincere compliment)

NidStyles's picture

Too many of your generation is too busy telling the rest of us how we are not working hard enough though.

jbvtme's picture

i have little respect for anyone in my generation. as far as the younger folks (20 somethings). it's not about the lack of ambition as it is the lack of entrepreneurial instinct. everyone is looking for a job as opposed to a career or vocation. when i was young i asked people my age what was the secret of their success. the consensus was being self employed and staying out of debt. i managed both and retired at 55.

NidStyles's picture

Good luck doing that in a country with a declining standard of living and your best job opportunities are fast food and working for the government. This stuff did not happen overnight...

Also, most of these younger kids are being raised in poverty, so starting a business is not exactly a step out onto the sidewalk of life, and half the time what they might try to start is likely illegal. 


jbvtme's picture

i painted houses when i was in college. roofed after that. then carpentry and odd jobs. lots of cash jobs.

NidStyles's picture

While in college. You're not noticing something about that are you?


It's like I'm talking to the wall here, and the wall is denying it's own existence or the 800lb Gorilla sitting in the corner. Look at who is in Congress right now. Hint, not many under 55. 

daveO's picture

30 years ago, I watched a news segment on Detroit(Detoilet). There was a 20 year old guy(guess which color) who said he wasn't about to bag groceries for a living when he could collect more on welfare. It takes a lot of working slaves to carry this load. He's been(if he's still alive) milking the system your whole life. Detoilet declared bankruptcy, but DC refuses to. Hyperinflation instead. 

malek's picture

And hopefully you were clearsighted enough to write off your "contributions" and save for yourself at the same time.

Sudden Debt's picture

Okay, that's what we call the generational conflict.


The "boomers" took from the system on average 2.7 times as much as they contributed.

They looked at their children and said: PISS OFF!

And they looked to their parents and said: DIE OFF! and put them in retirement houses...


now the real question will be: will the new generation who has seen all that happen... take care of the old boomers?

the boomers like to think so...

the boomers expect to get all and more...



The boomers like to say: LOOK AT WHAT WE DID!!!

And figure out that all the rest must be lazy because they don't have what they have.

They have no clue that now people have to work 3 times as hard.

And why?

Because all the boomer costs need to be repaid and everything is turning expensive because of it.


The current solution to the problem actually is the parasitic cost of those boomers that has made it impossible for the younger generation to expand.

If we want to restore the system, all wealth of the boomers needs to be destroyed so we can start from zero.

Now the real vicitims will be people like me who are midway. Nearly 40, already halfway. Restarting is a bit more difficult. but not impossible.


Headbanger's picture

Oh pleeze..  That's a generalization that doesn't apply to most of us boomers as I know plenty who have done much the opposite.

But I agree with you about all of the other self indulgent, deserving, me me me Beemer driving Boomers that fit your depiction.

And Porche pukes too.



Sudden Debt's picture

well... it's not like everybody who drives a beemer is evil... some of them are very likeable and friendly and smart people... :)


And I understand what you're saying. I'm a nearly 40's guy.  I'm fucked up in my own way. My crede is fuck everybody and I only take care of my own kin.

But when you hear the younger generation and I've always worked with them, they simply don't give a fuck about anything anymore. And frankly why should they? There's nothing left for them anyway.

Only a rare few will be able to buy our houses, the salaries they make are a joke and may god help them if they ever retire.

What's their goal?


And as boomers go, I only know the upperclass kind. And believe me, sometimes they can piss me off... in a very big way.

They have a superiority over themselves because they took everything on the cheap but most of them never really worked a real day. The jobs back then done by 5 is now done by maybe 1 or a app.

Most of them don't stand a chance if they would need to start over.

And they all forget that when most young people don't get what they want... that they tend to take it.

And they forget that the way to "took care of their parents" and their children that this will be the way those kids will take care of them.


You should ask something very cruel to a younger person: "HOW MANY TIMES DO YOU THINK ABOUT WHEN YOUR PARENTS WILL DIE AND WHY'

They'll tell you: At least twice a week.

And why?

for the money.




SmackDaddy's picture

I'd say that this applies to most generalizations and certainly here: there is more variation within a population than between two populations. Obviously there are a lot of good people and worthless fucks in every generation. I will say that my wife and I have assumed leadership roles in each our families over our parents (all born mid 50s). But I would say this is in uncharacteristic of my peer group