In terms of personal savings, including retirement savings, the middle-class group saves about 17.5% while the high-net-worth group saves 21%. Finally, the wealthy pay an average tax rate of about 5.4% while their counterparts pay about 4%. Of course, it must be noted that the middle class have also saved more for retirement, and therefore their consumption pressures in retirement are expected to be somewhat lighter than those on the population at large. The high-net-worth group is generally adequately prepared for retirement. But the fact that they account for only 7% of the population is not very consoling.
Summing Up
The first thing to note is that the pending boomer crisis is real and immediate. There should be no illusions about this issue in the advisory community. The problem could be as big, if not bigger, than the 2008 financial crisis, which led to enormous bailouts. It's big enough that it could require the involvement of Congress and new legislation if boomers are to have enough money in retirement, including Social Security and Medicare. Unless such basic benefits are secured, the retirement problems of boomers will worsen. There are 90 million boomers retiring betweeen 2010 and 2030, and they collectively own most of the nation's assets. If they organized to fix this problem, they could become a huge political force of change. But in lieu of a grassroots movement, it is up to the advisory community to serve the children and grandchildren of those who fought World War II.
Somnath Basu is a professor of finance at California Lutheran University and the director of its California Institute of Finance. Dr. Basu also serves as a professor of the Helsinki School of Economics' executive MBA program. He's involved with financial planning organizations including the National Endowment for Financial Education, the CFP Board of Standards, the International CFP Board and the Financial Planning Association.