Retirement Comes Later For Boomers

March 30, 2004 ( - From concentrated shifts into more conservative fixed-income investments to the greatest wealth transfer in history, Baby Boomers may be in for a surprise when it comes to their retirement years.

As Baby Boomers face retirement, many of the “traditional” rules of retirement may not hold true. Rather than an abrupt age 65 retirement party and gold watch, boomers will ease into retirement. This in turn will have a ripple effect in the broader markets, since Boomers will be less inclined to see their equity investments with a steady stream of income still coming in, according to a news released issued by Richard Hokenson, the head of the consulting firm Hokenson & Company.

Speaking of which, where did the notion of retiring at 65 come from? According to Hokenson, the notion of mandatory retirement at 65 dates to 1874, when the first private industrial pension plan was established by a railroad company. At that time, 65 was believed to be the maximum age at which one could safely operate a train.

The retirement age of 65 was formally institutionalized for all U.S. railroad workers by the Railroad Retirement Act of 1934, legislation that played a key role in determining a retirement age in the Social Security Act of 1935. As a result, for nearly three-quarters of a century the retirement age of 65 has been a fundamental assumption in most economic models and financial forecasts.

In reality though, Hokenson sees an easing into retirement, spurred by two things, in his report titled “Retiring the Current Model of Retirement.” First, are the results of preliminary research on Alzheimer’s disease that show continued stimulation of the mind may actually inhibit the disorder’s progress. “The likelihood of developing Alzheimer’s disease has recently been shown to be inversely correlated to the level of one’s physical and mental activity. Although the evidence for ‘use it or lose it’ is limited and preliminary, it may be enough to influence a culture that, as a whole, is very gerontophobic,” Hokenson notes.

Second, is that the new retirement pattern is being altered by the longevity of the boomers’ parents’ generation. “For the first time in history,” Hokenson writes, “there will be multiple generations of retired households. This is very likely to have a profound impact on inheritance.”

For example, the long-awaited transfer of wealth to the baby boomers may not happen. Will the parents of the baby boomers bequeath their remaining assets to the boomers, who are themselves retired, or to their grandchildren or great grandchildren, or will they do something else with these assets, Hokenson ponders.

Without this transfer of wealth, Hokenson’s forecast sounds several alarming notes. He describes Social Security as “a pure demographic Ponzi scheme,” an argument he first raised many years ago in a report entitled “Social Insecurity.” In this current report, he reiterates his opinion: “There are simply not enough potential contributors to Social Security to allow baby boomers to retire at the same ages and similar standard of living enjoyed by their parents.”

More information can be found on Hokenson’s Web site at .