This blog post presents a retrospective on 2006 media coverage stirred up by the so-named, former "Junk Bond King" Michael Milken and Wharton Professor Jeremy Siegel. They predicted collapse of the U.S. stock and bond markets due to Boomer retirements. How prescient were they? Judge for yourself.
Michael Milken and Jeremy Siegel have a couple of things in common. Possessing sufficient personal retirement wealth is the first.
In spite of his nefarious reputation as the "junk bond king," a convicted felon for securities and mail fraud, Milken clearly has squirreled away enough money to cover his nut (with an estimated net worth of over $3.7 billion in 2020). Siegel, a tenured finance professor at Wharton, will never face the potential indignity of being a Wal-Mart greeter late in life.
The other commonality is their focus on the possible financial collapse of stock and bond markets when Boomers cash out of more risky investments to fund conservative retirement allocations and late-life expenses.
Siegel correctly warns that “the aging population is the most critical issue facing the developed world.” He observes that in 1950 life expectancy vs. retirement age were 1.6 years apart: age 69 vs. 67, respectively. The gap today is 14.5 years. To reverse this trend and slim down the period that the average Boomer might spend in retirement, one option is for the average retirement age to increase from 62 today to 73 or 74 in the future. In this scenario, people will work, on the average, 10 to 12 years longer.
However, he recommends an alternative strategy. The non-Western world is younger than the developed world, especially the U.S., Europe and Japan, so “we embed in a global economy, (and) we can sell assets to a developing world (and) they can ship us goods.” The elderly in developed countries trade their savings for goods produced by the young in developing countries.
Milken, who has remade himself as a major philanthropist, contributing millions to cancer research and public health organizations, further observes that there are two noteworthy demographic trends today. The first is a growing middle class in developing nations, such as India (thanks, in part, to the off-shoring of so many U.S. technology and customer support jobs). The other is an aging population in the developed world.
The very good news to Milken is longevity. Men, for example, have gained 12 relatively healthy years during the last 20, from a life expectancy of 60 to over 72. “We’re living longer and more productive lives, so we’re going to want to work longer.”
Working longer means we’ll produce more products and services to sell worldwide (and be less likely to liquidate the assets we have), so we won’t need to trade our assets (retirement investments in stocks and bonds) for goods and services. The nation will produce more goods and services for an increasingly materialistic world.
This all seems rather naïve. According to a gloomy story in U.S. News & World Report, "Forty-one percent of workers ages 45 to 54 have less than $25,000 saved up for retirement." Further, neither pundit addresses the human resources side of a nation risking deep recessions because of Boomer longevity and corresponding market lassitude. Quite the contrary, the most threatening issue of our time is longstanding ageism in corporate America.
For two decades, many Boomers have confronted the career turmoil of outsourcing and off-shoring. They are your neighbors and former colleagues who now methodically dispatch “youthified” resumes to online job sites, network in mastermind groups, and sometimes admit defeat to become now-and-again consultants. Some end up measuring your inseam for a new suit or steaming you a latte. Some do both in a single day. (These victims of globalization and the breakdown of loyalty between companies and workers do not include someone who made a fortune selling junk bonds or a professor shrouded in tenure.)
The Boomer Generation has been an abundant human resources goldmine that has enriched this nation’s corporations for decades. The most educated generation in history has augmented the nation's economic competitiveness, both as creators of wealth and aggressive consumers. For the last several years, this gift of inventiveness, industry and consumerism has been rewarded with bankruptcies of pension funds, widespread layoffs, and movement of blue- and then white-collar jobs overseas.
Siegel sees further globalization as the salve. Milken believes longer, healthier American lives will logically lead to longer careers. Both offer incomplete solutions.
If Mr. Milken and Professor Siegel wish to see this nation securer from financial upheaval due to a market exodus by aging Boomers, then they need to focus on how the business community can change longstanding discriminatory practices, including disengaging older workers mid-career and providing too few new opportunities for meaningful and secure employment in later life.
We won’t find satisfying and highly remunerative work if our jobs continue to relocate overseas. We can’t work if corporations don’t learn to value and employ older workers beyond low-paying service jobs.
Postscript: In September 2020, 40 percent of Boomers had retired according to Pew Research Center. On March 7, 2021, the Dow Jones Industrial Average gained 306.14 points, or 1%, to reach a new record of 31,802.44.
P.P.S. In 2014 during a speech to the Canadian financial services industry, I addressed how Boomers+ transform industries to defy the gloomiest predictions about the impact of their aging. Take a look.
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