Wednesday, August 1, 2012

Retiring baby boomers...Society's malignant tumour?

Canada's baby boom is said to have commenced way back in 1946.  I myself was born 20 years after the start of the boom, and having just celebrated my 46th birthday that means the front end of the baby boom is now hitting retirement.

What does this mean for our society as a whole?  I'm afraid the picture isn't a pretty one.

Boomers are, in the opinion of this lowly blogger, the most spoiled generation ever.  Because of their huge demographic footprint every government program and marketing strategy begins and ends with the question:  

"How will boomers react"?  

That's the way its been for the past 50 or so years, and I don't see it changing.

Just look back at the last few decades and its not hard to picture boomers as a swarm of voracious locusts, gobbling up everything in their path, and in their wake leaving a wasteland.  

In the late sixties and early seventies boomers started driving, and soon there was an energy crisis.  Then later in the seventies when they left the nest, vacancy rates for rental accommodation reached all time lows.  In cities like Toronto finding an apartment sometimes meant paying an illegal broker.  

When the eighties rolled around and boomers started earning more money they began buying houses and taking out mortgages in droves.  And because of the increased demand for money interest rates went sky high, in the neighborhood of 20%.  Of course once those houses started to get paid off boomers started looking for a return on their deposits.  But supply and demand is a bitch, with banks loaded with capital and with demand for borrowing on the decline, interest rates tanked.  Gone were the 10% returns the banks paid their parents.

Then came the stock market boom of the nineties as the "me me me" generation sought a higher return on their investments.  And everyone knows how that worked out...with the crash in 2000/2001.  Boomers move in, they gobble everything up, and they leave destruction in their wake, that's the way its been and that's the way its going to continue to be unless history stops repeating.

So what do we have to look forward to over the next ten, twenty, perhaps forty years?

Population experts are telling us that within twenty years nearly one in four Canadians will be over the age of 65, retired in other words.  I doubt many of us following behind will be retired by that age however.  I'm guessing we're going to be working til 75 or 80 to pay for the care and maintenance of this generation that never worried about downloading costs onto future generations.

Some boomers will likely be clogging the workforce too, given that studies suggest roughly half of all boomers don't have savings plans in place.  No wonder its so hard for many young Canadians to find remunerative employment, 50 and 60 somethings won't leave the table and give up their seat.  

Of course if home owning boomers need cash, I guess they could sell their houses to finance their golden years.  Won't that be a pretty sight?  If the numbers I'm reading are accurate roughly half of the people hitting retirement could be selling their houses over the same time frame.  

No defined pension, inadequate savings to finance retirement, but a paid off house that you can't eat.  YUMMY.  The RE market in Canada is already at about the same place the US market was at back in 2007/2008 when we started slutting out sub-prime government insured 40 year mortgages with zero money down.

Boomers looking to exit the housing market in significant numbers could easily to turn Canada into a colder version of Arizona.

But if you're a boomer, don't worry about it.  Just push the cost onto the backs of your kids and grandchildren.  

And I didn't even mention the taxation that's going to be required to keep government funded health care afloat.  

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