[LTPC-discussions] Fw: LTC Bullet: Beware the Baby Boomer Bust
ltpc-disc@ltpcalums.com
ltpc-disc@ltpcalums.com
Sat, 2 Aug 2003 09:55:51 -0600
----- Original Message -----
From: "Center for Long-Term Care Financing" <ltcbullets@centerltc.org>
To: <Recipient list suppressed>
Sent: Tuesday, July 22, 2003 2:54 PM
Subject: LTC Bullet: Beware the Baby Boomer Bust
> LTC Bullet: Beware the Baby Boomer Bust
>
> Tuesday, July 22, 2003
>
> Seattle--
>
> LTC Comment: Smart boomers will heed the warning signs of future
financial
> Armageddon and prepare with private savings and insurance. That's good
for
> them and better yet for the less fortunate who must depend on whatever's
> left of public social programs after the Age Wave hits. More after the
> ***news***.
>
> *** QUERY: HOW MUCH HOME EQUITY DO THE ELDERLY OWN? The answer is
> important because home equity conversion can provide a godsend of
> supplemental income for seniors whose interest on savings has plummeted
> recently. Among other things, this extra income could help more seniors
> afford the premiums for private LTC insurance to protect the remainder of
> their estates.
>
> We calculate the total home equity of people over age 65 to be at least
> $1.4 trillion, probably much more. If you have a better estimate, please
> respond to this email with a source and citation. The two germane tables
> from the Census' "American Housing Survey for the United States, 2001"
are:
> http://www.census.gov/hhes/www/housing/ahs/ahs01/tab714.html
> http://www.census.gov/hhes/www/housing/ahs/ahs01/tab715.html
> Here's how we derived the $1.4 trillion estimate.
>
> Of 17,513,000 owner-occupied elderly households in the U.S., 73 percent or
> 12,792,000 are owned free and clear, i.e. no mortgage. Median home value
> (the Census tables do not provide the mean) is $107, 398. If we assume
the
> mean average is at least as large as the median, which is a safe
assumption
> because the really huge home equities get washed out when calculating the
> median, then total home equity of elderly households is at least $1.37
> trillion (12.8 million unmortgaged households times $107,398). We say "at
> least," because (1) the mean home equity is probably considerably higher
> than the median and if we knew the mean, that would be our value
multiplier
> for total unmortgaged homes and (2) of the 4,721 mortgages on elderly
> households (some elderly households have more than one mortgage), most
have
> been paid down considerably so that, while the equity is not 100%, it
would
> still be substantial, and is not included in the $1.4 trillion
> estimate. Based on this, we conclude that $1.4 trillion in senior home
> equity is probably a low estimate. Comments? ***
>
> *** Are you planning to attend THE 2003 NATIONAL LTCI PRODUCERS SUMMIT
this
> November in New Orleans? If so, plan now for a late dinner on Monday,
> November 17. Immediately after the "Networking Reception" sponsored by
> Physicians Mutual and MetLife from 5:45 PM to 7:00 PM, Steve Moses will
> present a one-hour preview (7:00 PM to 8:00 PM) of the Center for
Long-Term
> Care Financing's highly regarded LTC Graduate Seminar. Contact Amy
> McDougall at 425-377-9500 or mailto:amy@centerltc.org to reserve a
> place. For information on the conference, go to
> http://www.ltcsales.com/summit.html . For information on the LTC Graduate
> Seminar, go to http://www.centerltc.com/ltc_grad_seminar.htm . ***
>
> *** LATEST DONOR-ONLY ZONE CONTENT: Here's the latest Zone content
> followed by instructions on how to subscribe.
>
> LTC E-Alert #3-045--Obesity Plagues Medicaid/Medicare Seniors and Budgets
> (Health Affairs article says obesity-related ailments drive up Medicaid
and
> Medicare costs far more than they increase private, out-of-pocket health
> care spending.)
>
> LTC E-Alert #3-046--High Tech LTC
> (Remote sensors tracking infirm seniors' behavior and transmitting
> instructions via the internet to take your pills or turn off the
> stove. Will LTCI pay?)
>
> Don't miss our "virtual visits" to major LTC industry conferences in The
> Zone. You'll find our comparison of the conferences, session summaries,
> interviews and pictures at http://www.centerltc.com/members/index.htm .
>
> Individual donors of $150 or more and corporate donors to the Center for
> Long-Term Care Financing receive our daily email LTC Bullets, LTC
E-Alerts,
> LTC Readers, and LTC Data Updates for a full year. You'll also get access
> to the donor-only zone where these publications are archived along with
> other donor-only features. If you already qualify for The Zone, you can
> click the following link, enter your user name and password, and go
> directly to the latest donor zone content and
> archives: http://www.centerltc.com/members/index.htm . If you do not
> already qualify for The Zone, mail your tax-deductible contribution of
$150
> or more to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue
> North, #110, Seattle, WA 98109. Then email mailto:damon@centerltc.org
your
> preferred user name and password (up to 10 characters each). You can also
> contribute online by credit card or direct withdrawal at
> http://www.centerltc.com/support/index.htm . ***
>
> LTC BULLET: BEWARE THE BABY BOOMER BUST
>
> LTC Comment: For years, we've highlighted the impending financial crisis
> facing baby boomers in this space and in the Center's donor-only
> publications. We've also faithfully covered the impending fiscal crises
> confronting "pay-as-you-go" social insurance programs all around the
> world. For examples of this coverage, take a look at the archives of LTC
> Bullets at http://www.centerltc.org/ and (if you're a donor) browse our
LTC
> E-Alerts, LTC Readers and LTC Data Updates in The Zone at
> http://www.centerltc.com/members/index.htm . You'll find summaries of and
> links to numerous studies by the General Accounting Office, the
> Congressional Budget Office, and public and private think tanks that
> describe and explain the frightening financial prospects posed by aging
> demographics.
>
> What's new on this subject and why does it matter? What's new is that the
> volume and level of concern about the financial consequences of aging
> demographics is skyrocketing. What matters is that people must recognize
> these risks now and begin immediately to prepare privately for what may
> happen. We offer the following examples of heightened concern. We hope
> LTC Bullets readers--including media, legislators, policy makers, public
> administrators, LTC providers and insurers--will help awaken the public to
> these concerns and urge them to save, invest and insure aggressively in
> preparation. Individuals and their families may not be able alone to
solve
> the social problems of retirement and health security facing America's
> aging population. But each of us can reduce the likely impact on
ourselves
> and our families. By so doing, we will also help save public resources,
> which are scarce now and likely to become much more so, for the truly
needy
> or uninsurable.
>
> Here's a potpourri of recent news--ammunition to help break through the
> barriers of denial and ignorance that block so many Americans from
> realizing and confronting the real risks that lie ahead. (To access the
> complete Wall Street Journal articles, you'll need a subscription to the
> WSJ Online edition.)
>
> ------------------
>
> Excerpts from Jonathan Clements, "Boomer Bummer: Retirement May Get Ugly
> for Generation," Wall Street Journal, July 9, 2003,
> http://online.wsj.com/article_print/0,,SB105769701432273000,00.html .
>
> "The boomers' retirement dreams are about to go bust.
>
> "I don't have much tolerance for doom-and-gloom pundits. Still, as I
think
> about the rapidly approaching retirement of the baby boomers, those born
> between 1946 and 1964, one thought comes to mind: It's going to get ugly.
> . . .
>
> "Losing Steam: Bulls and bears argue fiercely over whether stocks, bonds
> and real estate are over or undervalued. But whichever side you favor, it
> is pretty clear returns in the decade ahead won't match the heady gains of
> the 1980s and 1990s. That means boomers will find it tougher to retire in
> comfort. . . .
>
> "Result? Going forward, investors are almost certain to garner far more
> modest gains from their three biggest assets, stocks, bonds and real
> estate. My advice: Don't bank on earning double-digit gains. Instead,
to
> make your wealth grow, hold down investment costs, avoid foolish
investment
> mistakes and save like a demon.
>
> "Feeling the Squeeze: For the moment, Uncle Sam seems wonderfully
> generous. But this largess won't last, and my hunch is retirees will bear
> the brunt of future government cutbacks. . . .
>
> "Currently, the two Social Security trust funds -- one for disability, the
> other for retirement benefits -- generate a surplus, partially offsetting
> the regular government budget deficit. By 2018, however, the trust funds
> will be paying out more than they collect through payroll and other
> taxes. The Medicare hospital-insurance trust fund will be in a similar
> bind, starting in 2013. . . .
>
> "What to do? If you want to retire at age 65, you will likely need a
> bigger nest egg. I would assume tax rates are headed higher, which means
> the post-tax value of your retirement savings will be less than you
> imagine. I would also assume that the Social Security retirement age will
> rise, with younger boomers having to wait until age 70 to get full
benefits.
>
> "Coming Up Short: If all the boomers quit the work force at 65, it would
> create major economic problems, because there would be too many retirees
> and too few workers. But this is one problem that's likely to solve
> itself. Many boomers are already on track for a later retirement, because
> they simply aren't saving enough. . . ."
>
> ------------------
>
> "COST OF HEALTH INSURANCE TOPS LIST OF BABY BOOMER FINANCIAL
> CONCERNS. BLOOMFIELD HILLS, Mich.--(BUSINESS WIRE)--July 2, 2003--57% of
> surveyed baby boomers list the cost of health insurance as their top
> financial concern according to the Baby Boomer Report, a newly released
> survey commissioned by Del Webb, the active adult brand of Pulte Homes
> (NYSE:PHM). 'Finances are on the baby boomers' mind as they ready for
> retirement,' said Dave Schreiner, vice president of active adult
> development for Pulte Homes. 'Even with the abundant focus on fitness and
> wellness in our communities, long term financial considerations are
> critical to our residents. The current discussion over prescription drug
> benefits and other adjustments to Medicare will be very meaningful for the
> baby boomers.' According to the survey, boomers are not confident the
> money will be there when it's needed. 76% of those surveyed are not
> confident they will have enough income in retirement and 36% reported
> thinking about their retirement finances nearly every day. Also on the
> list of top financial concerns is the loss of social security benefits
> (ranked number 3 at 31%) and the cost of long term insurance (ranked
number
> 6 at 20%). Because of this, the size of the retirement nest egg is
> growing. On average, surveyed boomers feel they will need approximately
> $800,000 in savings for retirement and expect it will need to last as long
> as 19 years. Download other Baby Boomer Report news releases or the
> complete survey report at
> http://www.pulte.com/pressroom/babyboomerreport.asp
http://www.pulte.com/
> http://www.delwebb.com/
>
> Source: INSURANCE-LETTER for Tuesday, July 6, 2003. To subscribe send an
> e-mail to mailto:insletter@aol.com with the word "subscribe", or call
> 888.282.1765, or subscribe online at http://www.insurance-portal.com/
>
> ------------------
>
> "PENSIONS WOEFULLY UNDERFUNDED
>
> "The U.S. pension system -- what's left of it, that is -- is in sad
> shape. While many employers have moved away from offering workers fixed
> pensions, about 34 million current and retired employees are still covered
> by such plans, and many of them are woefully underfunded: They don't have
> nearly enough money set aside now to cover their eventual costs, according
> to an editorial in the Washington Post.
>
> "According to the Pension Benefit Guaranty Corp., the shortfall totals
more
> than $300 billion. The airline industry has $26 billion in underfunding,
> the auto industry more than $60 billion.
>
> "In light of this, the Bush administration has put forward a plan that
> deserves serious consideration, says the Post. It would use the
corporate
> bond rate for two years, an approach that has multiple benefits as a
> short-term remedy:
>
> o It would help companies during an economic crunch, ease a transition to
> a different system and, perhaps not coincidentally, keep pensions from
> becoming an election-year headache.
>
> o After that period, however, firms would have to adopt payment rates
more
> directly linked to the composition of their own workforces.
>
> o The notion is akin to certificates of deposit that pay different
> interest rates based on their maturity dates--the shorter the holding
> period, the lower the rate.
>
> "According to the Post, under this plan, companies with a greater
> proportion of older workers would have to pay into their funds based on
> lower interest rates -- in other words, they would have to ante up more
> money because their costs come due earlier. The administration,
> commendably, also wants to beef up disclosure rules that would let workers
> know the true financial state of their plans."
>
> Source: Editorial, "Fixing Pensions," Washington Post, July 15, 2003.
>
> For text
> http://www.washingtonpost.com/wp-dyn/articles/A56515-2003Jul14.html
>
> For more on Social Security (Reform)
> http://www.mysocialsecurity.org/
>
> Source: National Center for Policy Analysis, DAILY POLICY DIGEST
> Thursday, July 15, 2003
>
> ------------------
>
> Excerpts from Kelly Greene, "As Fed Cuts Rates, Retirees Are Forced to
> Pinch Pennies With Interest Income Down, Senior Citizens In a Florida
> Complex Face Tough Choices, The Wall Street Journal, July 7, 2003,
> http://online.wsj.com/article_print/0,,SB105752928082607800,00.html .
>
> " . . . Across the country, retirees and older adults are struggling with
> the dark side of falling interest rates. The Federal Reserve has made 13
> cuts in the past 2 1/2 years, chipping its benchmark rate to 1% from
> 6.5%. While cheap money has helped fuel a housing boom and may yet spur
> capital spending, the low rates are ravaging interest income from older
> Americans' investment vehicles of choice -- certificates of deposit, bonds
> and money-market accounts.
>
> "Low interest rates have always been a threat to retirees relying on
> interest income. But the relentless decline of the past two years, with
no
> uptick in sight, is taking a particularly hard toll on elderly CD and
> money-market investors. These are the people who tried to do everything
> conservatively with their money. For the most part, they didn't chase
> Internet stocks, and they didn't load up on debt. They sacrificed to pay
> off the mortgage while building nest eggs to leave their kids. . . .
>
> "So, with interest rates at a four-decade low, one big piece of income is
> drying up. The average rate for a one-year CD purchased last week was
> 1.59%, nearly four points off the average rate in 2000, according to
> Bankrate.com. The return on some money-market funds approaches zero after
> subtracting for overhead. . . .
>
> "Pat Wheeler, a Clearwater financial planner, got an earful while manning
> an advice hotline two months ago for a local TV station. The retirees he
> talked to typically had several hundred thousand dollars in CDs that had
> been paying 7% interest a few years ago and were now down to 2%, he
> says. 'If you have $200,000, that's $14,000 a year in interest that's
gone
> down to $4,000. It's quite a cut in pay.' . . ."
>
> ------------------
>
> "State, Local Budget Situation 'Remains Grim,' Fed Says. By John Connor,
> Dow Jones Newswires. The Wall Street Journal. July 15, 2003. The Federal
> Reserve Board told Congress yesterday that state and local budget problems
> remain 'grim,' with an aggregate deficit of $50 billion in 2002 and a
> growing deficit rate in the first quarter of 2003. Weak incomes, falling
> stock prices and tax cuts in the late 1990s all contributed to eroding
> receipts. Although states are hardest hit, the effects are spilling over
> to localities, who must reduce spending due to lower payments from the
> states. States and many localities, required to balance their budgets,
are
> resorting to a variety of measures to remedy their situations: selling
> assets, issuing bonds, drawing upon reserves, increasing taxes, and moving
> payments into the next fiscal
> year." http://online.wsj.com/article/0,,BT_CO_20030715_006697,00.html
>
> Source: AHCA / NCAL Gazette, Monday, July 16, 2003
>
> ------------------
>
> "Nursing homes under siege. A proposed 15 percent rate cut in the $116
> daily Medi-Cal reimbursement rate to health-care providers threatens to
> affect the ability of nursing homes to keep their staffing levels intact
> and remain open. The 15 percent cut was proposed by Gov. Gray Davis as a
> part of the seemingly never-ending budget battle in the state
> Legislature. Republicans and Democrats blame each other for the budgetary
> stalemate...
> http://www.ivpressonline.com/articles/2003/07/13/news/news05.txt "
>
> Source: Long Term Care Provider.com Newsletter -
> http://www.longtermcareprovider.com/
> Wednesday, July 16, 2003
>
> A formatted version of today's LTC Bullet is available at
> http://www.centerltc.org/bullets/current/454.htm
>
>
>
> _____________
>
> *** Forward freely; encourage subscribers! ***
>
> The Center for Long-Term Care Financing is a 501(c)(3) charitable
> non-profit organization dedicated to ensuring quality long-term care for
> all Americans.
>
> *** Right now, you can show your support with an online donation through a
> secure server connection at http://www.centerltc.org/support/index.htm .
***
>
> Contributions are tax-deductible. If you get value from our LTC Bullets,
> our web site, our reports, our speeches or our public policy advocacy,
> please consider making a donation. Even small contributions are very much
> appreciated. Visit our website at www.centerltc.org/needhelp.htm or
> contact Amy Marohn at mailto:amy@centerltc.org for more details.
>
> This e-mail is the latest installment of "LTC Bullets" - the Center's
> periodic online news service covering the latest information and trends in
> long-term care financing. We welcome responses to the material presented.
>
> *** Unsubscribe by simply using your reply button to send a
> request. Please put your e-mail address and name in the body of your
> message. Your e-mail address will be deleted from the Center's mailing
> list before our next mailing. We apologize for any inconvenience. We do
> not intend our "LTC Bullets" to reach anyone not interested in receiving
> them. ***
>
> All past issues of LTC Bullets may be read on the Center's web site at
> www.centerltc.org
>
> Please direct any questions or requests to mailto:info@centerltc.org
>
> Thank you for your time and interest.
>
> Center for Long-Term Care Financing
> 2212 Queen Anne Avenue North, #110
> Seattle, WA 98109
> Ph: 206-283-7036
> Fax: 206-283-6536
> E-mail: mailto:info@centerltc.org
> Web: www.centerltc.org
>
>