She also suspects that future retirees may not have it so easy for a variety of reasons. Chief among them is that only a sliver of Americans working today have a defined benefit plan. But that’s just the start.
Baby boomers are considered to be bigger spenders and skimpier savers than the previous “silent” generation that represents the bulk of today’s retirees. While boomers have participated in the bull market in stocks and bonds that began in 1982, most hadn’t accumulated the same amount of assets as prior generations when these markets took off.
People who had sufficient assets to retire before 2009 have earned double-digit returns on the equity portion of their portfolios early in their retirement years. Consequently, they managed to turn the sequence-of-returns risk to their advantage if they didn’t bail out of equities during the financial crisis.
Besides the prospect of lower returns going forward, other risks to future retirees includes stresses on Social Security and Medicare. While politicians have not shown any willingness to address entitlements, current benefit levels are unsustainable without dramatically higher taxes. What’s more likely are solutions that gradually chip away at benefits, combined with the expansion of stealth taxes on those same benefits.