David Rosnick and Dean Baker at the Center for Economic and Policy Research released a report in February 2009 that provides a sobering picture of the retirement prospects for many baby boomers. Key excerpts are included below.
Link: The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble
Workers have a limited number of years during their lifetime in which they can accumulate wealth toward retirement. If they save little or nothing during a substantial portion of these years because they expect wealth generated by a bubble to persist and grow further, then they are likely to find themselves ill-prepared for retirement when the bubble bursts.
… as a result of the collapse of the housing bubble, the vast majority of baby boomers will be approaching retirement with little wealth outside of Social Security. While the younger baby boomers will still have some opportunities to accumulate wealth in the years until they retire, it is unlikely that the picture will be very different after a relatively small number of additional work years. This means that cutting back Social Security and Medicare from current levels will impose serious hardships on this age group.
Finally, these projections should make clear that home ownership is not always an effective way to accumulate wealth. Home ownership during a housing bubble was a route toward losing wealth, not accumulating it. While typical homeowners cannot be blamed for not recognizing the bubble, the economists and policy professionals who designed policies that pushed homeownership certainly can and should be blamed.
It was possible to recognize a bubble at least as far back as 2002 based on the sharp divergence in
house prices from their historic trend. The fact that so many economists and policy professionals
failed to recognize and warn of this bubble had enormous consequences. Unfortunately, the people
who listened to these experts are likely to suffer the consequences of the experts’ failure, rather than
the experts themselve
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