Equity is Not a Good Investment

Posted by: Gene M. | Jan 05,2008


Here’s an interesting article about Boomer’s prospects for retirement.  I thought I’d seen every statistic about Boomers, but then the article says this: “Nearly a third -- or 25 million boomers -- have less than $10,000 in cash or funds for retirement.”  That’s a pretty startling figure.  It’s goes in line with what Henry wrote today about the culture of spending.  For Boomers, there’s a culture of not saving, which is really two sides of the same coin.  

The reason most Boomers are not saving is likely not because they don’t have the money, as Boomers are said to be the most well-off generation in history.  No, they have had, at one time, a pocket full of dollars but instead decided to spend the money rather than save it.  And they’re not necessarily spending it in progressive ways, but spending it on gadgets and material goods that lose value, as opposed to sound investments.  

The study goes on to point out that the core to most Boomer’s wealth is in home equity.  That makes me think a big, “Uh-oh.”  Boomers overvaluing their homes could have a similar result to the summer mortgage crisis.  People found that the lowering value of their homes was not making mortgage payments worthwhile, so they just decided to foreclose on the property.  Boomers may find that the equity built up in their homes is less than they hoped.  As a result the resale value is less, so they’ll have much less savings going into retirement than they anticipated.  

The answer: don’t be a part of that block of Boomers with under $10,000 in savings.  You’ve got to diversify: savings, equity, Social Security, and retirement accounts if you hope to have a comfortable retirement.  

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