In the 1960s, over 50% of America’s 30-year-olds were both married and homeowners. That percentage is down to 12% today.
Peter St. Onge shared that data, when he posted this recently: “When Nixon handed the economy to the Fed in 1971 he took it from the young.”
In other words, when Nixon took the U.S. off the gold standard (where every dollar was backed by gold) – our government started to print money, inflation surged, and asset holders benefited at the expense of the young (who did not own assets).
Boomer Pensioners Live like Kings
Two close friends of mine from high school (both fellow boomers) were sharing their photos from their luxury European vacation on a text thread recently.
They travel constantly and definitely live the good life. They are also both retired pensioners (cop and firefighter), married to other pensioners – and they are wonderful people (fit, active, friendly, close to friends and family).
And because of that, they will live well into their 90s. So, while I am delighted for my friends, the pension system itself is not close to sustainable – when retirees are pulling out multiples of what they contributed (if they contributed at all).
Life Expectancy Was 62 in 1935 – When Social Security Was Established
When Social Security was first set up in 1935, the life expectancy in America was about 62. Today it is about 80. So, if Social Security were established today with a 1930s perspective, retirement age might be 83 (3 years after average life expectancy) instead of 65.
When I’m in CA, I go to the dog park in the morning with a bunch of fellow boomers. They too are wonderful people – who have done extremely well in life.
Most of them bought their $3 million+ homes in the 1980s or 1990s for “seven raspberries”, and all of them have watched their stock portfolios shoot through the roof – especially since 2008.
So, we boomers are shrewd investors, right? Maybe not. What really happened is that boomers owned all of the assets that benefited from inflationary spending, while non-asset owners got killed.
Over 90% of the S&P 500’s gains have occurred since “quantitative easing” (where the Fed buys bonds and stocks) started in 2008.
Many boomers who are not living solely off of pensions, are living off of asset gains – where they sell stock or borrow against their homes to subsidize their lifestyles (I know many boomers who do this too).
Problems with Boomers
The problems with boomers are actually several fold: (1) we do not consider ourselves the lucky beneficiaries of incredibly irresponsible fiscal and monetary policy (we’re “shrewd,” remember?) at the expense of the young; (2) many boomers don’t understand that the system of government spending and expensive pensions is not even close to sustainable; and (3) we vote.
Possible Solutions?
Among other things, government pensions should be based on actual contributions and not just promised benefits; the retirement age should be bumped up steadily to be more in line with today’s life expectancy; and we might even means-test social security, so rich boomers don’t get anything.
But that will never happen.
What will happen is this: politicians will never go near this (remember, boomers vote), and our government will just continue to borrow and spend that much more to subsidize boomers. And that will, in turn, foster that much more inflation, which will only benefit asset holders at the expense of wage earners.
#1 Reason to Buy a Home
And that leads to the #1 reason to buy a home: “There’s No Stopping This Train.” (Analyst Lyn Alden’s famous comment about our runaway spending problem – and the likelihood of more inflation).
Young people need to own assets so they avoid getting hurt even more by the boomer spending train – and a home is the perfect asset to own, as an inflation hedge, a place to live, a forced savings plan, an art project, a retirement nest egg, and more.
Home prices may correct at some point in the near future, but over the long run, they will increase with inflation like most assets almost always do.
And waiting to buy will only make it that much harder to buy in the future.
