There is increasing evidence of a nasty and chill financial wind blowing through the expectations of the Baby Boomers as their retirement days approach at increasing speed. The causes of the problem are many and include the recent financial meltdown, world recession, Euro horror and the huge evaporation of middle class wealth in the USA, Aussie and NZ; the problem is that a lot of people have not amassed sufficient monies to live off once their working days are done and the Boomers are increasingly reaching that point.
A second front in the battle for any hope of an enjoyable aged lifestyle is the fact that we live so much longer, and that the extra years we have gained are so horrendously expensive. The fastest growing demographic in the US is centenarians, folks over 100 years old, the cost of healthcare alone will become a colossal burden on the state and, more particularly, on personal resources.
Many Boomers are seeing the inheritances they were expecting from their parents, inheritances they thought might augment their own retirements, disappearing as their folks just keep on living. It’s not just the cost of power and veges; but the new hips, knees, valves and the medicines consumed. The actuality is that for a large sector of our society there will be a need to contribute to the well being of our parents rather than the gift of a financial lump sum when they pass.
Elderly investors living from the interest on their capital, amassed from decades of scrimping, saving and doing without, were the folk who chased the marginally higher returns from Bridgecorp and others of that type only to see their money vaporise. Suddenly, Nek Minnut, they are faced with having outlived their resource and whether as a result of illness, redundancy, financial misadventure or whatever, the result is the same and poverty in old age is not for the faint hearted.
New products and options appear with new opportunities; reverse mortgages, annuity insurances etc., etc. If you have looked at the rate a reverse mortgage eats up equity it is frightening. You can still outlive your monies and of course there is little left for the kids.
We are not a people who easily talk about delicate and potentially divisive issues but there is probably merit in discussing plans and expectations with parents and children. Difficult to do when the majority of us are without too much discretionary money after all the bills are paid. Scary to be looking to fund aging parents or to fund children and their families doing it tough; particularly if our own retirement option looks a little dodgy.
On another note, it is interesting to see a new product evolving for the Boomers with some means. ‘Active Adult’ communities are sprouting, communities offering scaled-down versions of mansions with everything. Medium sized maintenance free, spacious and loaded with the little luxury mod-cons loved by the boomers but without the body corporates, the busybody committees or outside influences. The ability to enjoy autonomy and economy – of scale even, the invention of a ‘Spool’, larger than a spa and smaller than a pool. Boomers cashing up the McMansions are happy to buy this kind of product for good money, we see the disproportional growth in the prices paid for three bedroom one level property daily. This type of property close to facilities is almost impossible to replicate and will be sought after and attract premiums. A cluster of such homes in Howick has sold very successfully for premium prices.
A quick look at the stats just received shows that activity levels in the local Eastern Beaches area have had a big bounce. Note a record median sale price at $620,000 and the second highest number of sales transacted in the past 12 months; bodes well for the neighbourhood I think.
This is a great time to consider creating a property portfolio, creating a plan to create capital to assist towards whatever your future holds.
June 12 2012 03:29 pm | Uncategorized