Slow Train Coming

Don’t look now but 78 million baby boomers will start retiring next year. The implications are nothing short of staggering.

In August of 1979, musical genius Bob Dylan released his 24th album entitled, Slow Train Coming. In the self-titled track, Dylan warned listeners that there would, one day, come a time of reckoning with the lyrics, “there’s a slow, slow train coming up around the bend.”

And with the unprecedented demographic changes that are about to take place within the United States, one has to wonder if that prophesied day of reckoning is at hand.

In fact, as you read this essay, America’s 78 million baby boomers are readying themselves for retirement. Indeed, the leading-edge of the baby boomers–those born in 1946–will turn 62 in 2008. And for the next 18 years, there will be a tidal wave of Americans looking to cash in on the promises made by the federal government.

And therein lies the rub.

After crunching the numbers, it appears that the country is going to be in a little bit of cash pinch when it comes time to fund these retirement promises.

How much is this “cash pinch?”

According to a leading economist and Boston University Professor, Laurence Kotlikoff, we have a shortfall of about, oh let’s say, $62 trillion.

“Come again?”

The number is $62 trillion (with a T).

The way Kotlikoff figures it, the U.S. government is presently using less than contemporary methods of accounting. According to Kotlikoff, “Our government is using an acrual based form of accounting. This type of accounting in essence records money in and money out–and even in that method we still running a deficit.”

To create transparency, Kotlikoff believes the government should be using a method called generational accounting. This methods accounts for not only money in and money out, but the entitlements that we promised to future generations like social security, medicare and medicaid.

Using Kotlikoff’s calculations, when you look at the future promises we’ve made, we are on the hook for $62 trillion dollars.

Although Kotlikoff has been the whipping boy for those who still believe that the social security trust fund is in fine shape, there are a lot of people who are beginning to adopt his view point.

Perhaps the hardest part to swallow about this whole thing is that most of the nation’s policymakers have known it all along.

Lest you think I’m kidding, I encourage you to read your latest social security statement.

And I quote:

“Unless action is taken soon to strengthen Social Security, in just 11 years, we will begin paying more benefits than we collect in taxes. Without changes, by 2040 the Social Security Trust Fund will be exhausted.”

“There’s a slow, slow train coming up around the bend.”

The solution to this problem?

Do not wait for the nation’s policy makers to make things right. Instead, it’s time for working Americans to start saving more–a lot more.

And corporate America is going to have to step up big time. Companies will need to do a much better job of educating their people on already-existing benefit packages. What’s more, they’ll need to create serious incentives to get employee’s attention to take this matter seriously.

And the time to take action is now.

Remember, demographics are destiny–and the 78 million boomers are going to be the proverbial pig through the retirement pipeline.

In retrospect, we should have see this coming all along–Bob Dylan did. The good news is, there’s still some wiggling room–but it’s definitely time to get on board.

Yours in good health,

Dr. David Hunnicutt

PS. Every single American should read, “The Coming Generational Storm,” By Laurence Kotlikoff. If you are interested (and you should be), you can read a review by visiting this link.

Or better yet, you can watch Dr. Kotlikoff himself by visiting this link.

Copyright 2006, David Hunnicutt.com

Information may not be reproduced or republished, in part or in whole, without express written permission.

The views and perspectives presented by Dr. Hunnicutt do not necessarily represent those of WELCOA.