Do most boomers ask why they have experienced near 30-years of increased wealth in homes and 401ks? Probably not. Why look a gift-horse in the mouth. Yes, when you tell these same boomers that the same demographic trends that created their wealth will eventually take it away, do they want to ask why? Another saying from their childhood. “What you don’t know can’t hurt you.” Or from our parents, “Whatever may be will be, the future isn’t ours to see…”
Let’s play some “what-if” games.
If you had to swap a ten year period of your income with your best friend’s, which decade would you choose? Would it be between 40 to 50, or 35 to 45? Certainly not 70 to 80, right? We agree that whatever period you pick, it would be an implicit prediction that your friend’s income will decline afterwards. (So far, for me, the right pick would be my working years between 45-55.)
If you average all the boomers income there is also has a optimum decade in which its productivity can go towards retirement savings.
So let’s pick a decade at which you believe your friend’s retirement savings will reach maximum value. If the stock market and real-estate continues to outpace wages, that would probably be between 70 and 80, right? If you are ten years younger, would you switch with him?
If you say ‘No, But I would have 20 years ago’, then realize, subconsciously at least, that you have some idea what’s going on.
When was the U.S. was most productive? It’s up for debate. I’d pick between 1985 to 1995. I’m picking this period because before 2000, GDP growth often passed 4%. It hasn’t since then.
I believe people are getting older and it’s no coincidence that GDP is falling. Of course, you probably see many critics saying “GDP is a phoney number, it means nothing.” Because if productivity is falling, why does the stock market continue to rise and prove the retirement doom-and-gloomers wrong?
The reason is that we may have not reached what I’d call “peak dead-weight”. I use the word “peak” because it is also a reminder of how economic forces (like oil, in peak-oil) can change in ways never predicted. I used “dead-weight” because that’s what old people are. They are a drag on economic productivity, even if small. Of course, I can only speak for myself and I will. At 57 I’m nowhere near as productive as I was at 45.
If you’re like my wife you’d like to tell me that age is a state of mind. Yes, but this issue is about the economy as a whole. We become less productive as we age. I need to push this point.
Fact. Muscle strength declines with age.
Fact. Memory strength declines with age.