Posted on: Sunday, January 20, 2008
Oldest boomers reaping the biggest benefits
By John Waggoner
USA Today
In a generation as sprawling as the baby boomers, you're bound to notice some big differences. And the main difference is probably this: The older boomers, exemplified by the 62-year-olds who will start retiring this year, occupy a demographic sweet spot that most younger boomers can't match.
The first of the baby boom generation — those 79 million people born from 1946 through 1964 — are just starting to reach the age when they can tap Social Security. And those older ones got all the good toys:
Cheaper houses. A boomer born in 1946 who bought her home in 1976, at age 30, would have paid about $39,300, according to the Census Bureau. That's equal to $145,200 now, adjusted for inflation. By contrast, a boomer born in 1964 who also bought his first house 30 years later would have paid $130,000, or $174,000 in inflation-adjusted dollars.
Better retirement benefits. Early boomers are more likely to have had a traditional "defined-benefit" pension from their employer than younger boomers are, notes Ron Gebhardtsbauer, senior pension fellow for the American Academy of Actuaries. Unlike 401(k) plans, traditional pensions require no contributions from the employee; all money comes from their employer.
Traditional pensions guarantee a payment for life, even though the value of that pension typically diminishes because of inflation.
But younger boomers generally have only 401(k) retirement savings plans. And they're likely to live longer than older boomers.
Superior investment returns. A boomer who started investing in the Standard & Poor's 500-stock index 30 years ago would have received a 12.95 percent average annual return, according to Lipper. One who started investing 20 years ago would have earned an average 11.8 percent a year. The difference in return might not seem like much. But it's huge over time. Had you invested $100 a month in the S&P 500 starting 20 years ago, you'd have amassed $74,500 by now. Had you started 30 years ago, you'd have a staggering $329,950.
Better jobs. By the time the younger boomers joined the workforce, their numerous older brothers and sisters had already filled many of the jobs, which meant that younger boomers had to work harder to find jobs.
Notes Susie Cooke, a 61-year-old retiree from Tampa, companies were more likely to provide their employees with good benefits when she first started working.
"By the time I retired, workers were just another piece of property," Cooke says.
