The Baby Boomer Boil Over? Or Bust Out?
Posted on 10. Jun, 2011 by ECI Development in General
In a recent op-ed column – “America Is at Risk of Boiling Over” – the Wall Street Journal’s Peggy Noonan expresses her concern for our nation’s fraying culture and the loosening of “bonds that keep us together.” This former President Reagan speechwriter predicts that in 2020, Newsweek and Time may well “do cover stories on a surprising, and disturbing trend: aging baby boomers leaving America, taking what savings they have to live the rest of their lives in places like Africa and Ireland.”
Or possibly even Belize, Costa Rica or even Nicaragua.
A recent report from the Employees Benefit Research Institute reveals that 47 percent of retiring Baby Boomers are in serious danger of running out of money. That report comes on the heels of a 2008 Ernst & Young study finding that three out of five current retirees could soon outlive their assets if they fail to cut back substantially on their spending.
Some would say that the solution is for the government to bail them out. But, unfortunately, the United States government is already asset-poor. It has raided Medicare and capped the COLA on Social Security. And it is now planning to ration health care. So, if Baby Boomers intend to get in line for government handouts, they’re going to find it a very long line, longer than they may have time for.
Fortunately, while the popular media generally ignore it, there is another option, one that, amazingly enough, would allow Baby Boomers to not only survive – but actually to prosper – on the potentially doubled value of their retirement incomes. And many retirees are already taking a serious look at seizing that opportunity and living out their remaining years in the relative lap of luxury.
How so? By moving south. Way south. To Central and South America, where the cost of living is a fraction of what it is in the United States. And where a retirement income that would force most Baby Boomers to live in destitution in the U.S. could put them in a spacious home on a sandy beach with swaying palms at up to half the cost. Already several hundred thousand folks are doing so. Right now. Today.
Allow me to use myself and my family as an example, because we have been living what I call “the good life at a great price” for more than seven years in Central America. My wife, Carol, no longer cleans house – because that’s the maid’s job at $140 a month. I don’t mow the lawn or trim trees – because that’s the gardener’s job, at less than $100 a month. We dine out regularly, with steak dinners for two and a bottle of wine costing $25, and enjoy weekends away in the cloud forest for less than a day in an amusement park in the U.S.
And our total bills – including utilities, food, entertainment, and private school for our girls – come to about $2,000 a month. Remember, that is for a family of four. To live our lifestyle in the U.S. could cost at least five times that much. Or even more.
This window of opportunity coincides with a historic time, a time when our nation’s Wall Street-driven economic landscape has forever been altered. As a result, over the next two decades, 84 million Baby Boomers are entering retirement and their 401(k)’s and home equity are still languishing in value.
Perhaps that helps explain why a Zogby poll of 103,000 Americans, a rather large statistical sample, revealed that 18 percent of Americans have a desire to move or own property outside of the United States – representing 26 million people dissatisfied with their quality of living. The survey further disclosed that 17 percent of the sample – some 4.5 million Americans – listed Latin America as their first choice.
This trend is not limited to U.S. citizens. In a survey of Canadian boomers, TD Waterhouse found that 45 percent of respondents, representing 9.3 million people, plan to spend at least one month or more outside Canada in retirement.
Already, nearly 500,000 American retirees receive their Social Security while living outside of the United States. The host nations have developed proactive policies to attract these retirees, and hence their capital, to establish a residence there.
And that makes sense. The average retired couple in the U.S. now receives $1,700 a month in Social Security benefits. Take out housing, utilities, medical expenses, car payments, insurance, and grocery bills, and there’s very little left at the end of the month. As the EBRI puts it: “nearly one-half of Early Baby Boomers are simulated to be ‘at risk’ of not having sufficient retirement resources to pay for ‘basic’ retirement expenditures ….” Pretty stark, isn’t it?
Yet, in the many parts of the Caribbean and Latin America, the same $1,700 would provide that couple a beachfront home or condominium with every modern amenity; a maid; plenty of food to feed themselves (and all of their visiting relatives); first-rate medical care; and sufficient money left over to travel and entertain to their hearts’ contents.
So, the bad news is that, quite simply, retiring Baby Boomers very likely will not be able to afford to live in the United States. The good news is that they no longer have to. And, perhaps, the best news is that when they make the move south, they may well have millions of their fellow retirees as prosperous new neighbors.
