Key Highlights
This report has a long list of interesting facts to share:

Consumers & their Savings Objectives
This section outlines consumers & their savings objectives:

• There are over 300 million consumers, an increase of over 5% since 1999
  
• There are over 117 million consumer households, an increase of 10% since 1997
  
• The consumer population has grown significantly, up 3 fold since 1915
  
• Two-fifths of the consumer population growth is coming from immigrants
  
• Almost half of consumers list retirement as their primary financial concern
  
• Almost half of baby boomers list retirement planning as their primary financial concern
  
• Less than one-quarter of Generation X households list retirement planning as their primary financial concern; they are primarily concerned with supporting their families
  
• The vast majority of affluent consumers list retirement as a primary goal
  

Baby Boomers & the Perceived Baby Boomers Savings Crisis
This section defines baby boomer and summarizes the case for their pending saving crisis:

• Many consumers have dual concerns around needing retirement income and not outliving their investments
  
• Births peaked between 1950 and 1960, when 3.7 – 4.3 million people were born each year, up hugely since 1940 when only 2.6 million were born
  
• There are 76 million baby boomers
  
• Consumers between 55 and 64 years old are expected to grow thefastest at about 4% per year
  
• Consumer households’ median age increase from 35.3 to 35.6 since 2005
  
• Consumers over the age of 50 account for 38% of the population an increase of 10% since 2003
  
• The consumer population is expected to continue to age over time, with nearly half the population over the age of 45 by 2010
  
• The cumulative number of individuals age 55 and older will increase dramatically in future years
  
• Consumers over the age of 55 control over three-quarters of consumer investable assets
  
• Furthermore, people over the age of 55 control half of all discretionary income
  
• With new health care technology, the number of centenarians is expected to increase dramatically over the next several decades
  
• Financial advisors say that baby boomers’ retirement is the issue currently having the greatest impact on their business
  
• Two-thirds of baby boomers will retire between now and 2023
  
• Almost half of consumers believe they will retire between the ages of 65 and 72
  
• The average expected retirement age has been getting older, now at 65, up from 62 in 1996
  
• Almost three-quarters of workers have been retiring before age 65
  
• Almost one-third of workers will be forced into earlier retirement due to layoffs or illnesses
  
• Two-thirds of consumers are very or somewhat confident about their retirement situation when retiring, many of these may be overconfident
  
• Baby boomers may continue to work part-time thus slowing the liquefaction
  
• Almost three-quarters of workers plan to work for pay after retirement; in reality, through, less than half that many actually do
  
• The 10% growth since 1990 of consumers age 65 & older currently working or seeking work reinforces the claim by seniors that they will be working longer
  
• Changes in medicare, social security, pension plans, and benefits are causing older consumers to work longer
  
• Less than one-third of consumers that do retire on their timetable are still financial challenged
  
• Less than two-thirds of consumers that are retired are simply trying to make ends meet
  
• The perceived baby boomers savings crisis is due to six factors, including the concentration of consumer wealth, the decline in pension plans & retiree benefits, social security & medicare challenges, the stagnant savings rate, the lack of World War II generation wealth transfer, and longer life expectancies
  
• Retirees rely on personal savings & investments, social security, defined benefit plans, defined contribution plans, & other sources
  
• Nearly half of retirees utilize social security as their biggest source of income
  
• Three-fifths of consumers believe they are behind schedule either in planning for or saving for their retirement years
  
• Consumers households have a median retirement savings of $22,500
  
• About 40 million households control 90% of all investable assets
  
• More specifically, high and moderate net worth consumers control over half of all investable assets
  
• Consumer households with less than $100,000 investable assets have decreased almost 4% since 2004 to 76 million consumer households
  
• On the other hand, consumer households with $100,000 - $1 million investable assets have increased more than 50% since 2004
  
• Real estate is proving to be a concentrated area of consumer household wealth over the past decade
  
• Half of consumer households have at least $10,000 in investable assets
  
• Many consumers are counting on income from pensions but won’t receive it; 62% of consumers expect to receive pensions when they retire however, only 41% say they or their spouses are currently covered by a pension
  
• Over the past two years, nearly 20% of consumers have seen their or their spouses benefits cut
  
• About half of public employee pension funds are underfunded
  
• The median annual pension payout is only $8,340
  
• The median annual expected pension payout is $20,000
  
• Three-quarter of consumers utilize 401k plans
  
• Two-thirds of workers don’t expect that social security benefits will still be available when the last baby boomer retires in 25 years
  
• Over three-quarters of consumers are taking social security benefits early
  
• The key issue is that as the population ages, the number of social security recipients is expected to grow faster than the labor force
  
• Social security projects tax revenues will fall below program cost in 2018
  
• Any privatization of Social Security could have a significant impact on consumers’ investable assets, adding $1 to $2 trillion in assets to the industry
  
• Consumer income has increased over 30% since 2001 to $12 trillion
  
• After 65 years old, on average, men bring in the majority of the income in the four typical income generating categories, including wages & salaries, social security, pension income, and asset income
  
• Consumer household personal savings has decreased 140% since 2004 to negative $82 billion
  
• Consumer household net financial investment has been negative since 2001
  
• While the needs of the baby boomer generation expand, the consumer savings rate continues to hit new all time lows
  
• Consumer households are now getting involved with retirement savings earlier than past generations
  
• The most common method for determining the amount of savings needed for retirement by consumers is guessing
  
• Almost half of consumer believes that they do not have enough money to live comfortably in their retirement years
  
• Many middle-aged consumers have serious concerns about their preparedness for retirement, but haven’t taken action for a variety of reasons, including a lack of confidence in their financial planning abilities, aversion to risk, and confusion about where to turn for help
  
• Increased IRA contribution limits should promote savings at all levels
  
• The wealth accumulation rate, or accumulated wealth to income ratio, has remained the same for any given age and all periods over the past 20 years
  
• The World War II generation wealth transfer has been less impressive than many predicted and it likely will not grow much further; however retirement and intergenerational transfers are more than half a trillion dollars
  
• The median value of a baby boomers inheritance is $48,000; very few have received more than $100,000
  
• But more surprisingly, only 15% of all baby boomers expect to receive an inheritance in the future, which may shatter the myth that boomers are going to inherit trillions of dollars
  
• Furthermore, the coming wealth transfer faces several limiting factors, including immediate spending, longer time in retirement, health care costs, taxes, and wealth concentration
  
• The risk of dying too young is increasingly being replaced by the risk of living too long, with life expectancies now averaging 77-78 years old
  
• The average life expectancy of a 65 year old consumer is 85
  
• The number of years spent in retirement has been increasing since 1950
  
• Almost two-thirds of affluent consumers may spend more time in retirement than in the workforce
  
• The number of years spent in retirement will increase to over 25 years by 2012
  
• Almost half of consumers worry that they may run out of money during retirement
  

The Real Situation: Facts About Consumer Wealth
This section addresses the flow of funds within households and provides the real facts on the state of consumer wealth:

• The good news is that consumer households have substantial assets, both financial and non-financial Consumer households control almost three-quarters of all investable assets, more than half invested via financial advisors
  
• Consumer households have almost $30 trillion of investable assets, $70 trillion of total assets, and over $55 trillion of net worth
  
• Baby boomers already account for nearly half of millionaire households
  
• Furthermore, baby boomers already account for almost one-fifth of penta-millionaire households
  
• Consumer households have over $33 trillion in investable assets, an increase of over 40% since 2002
  
• Consumer household investable assets net flows have decreased to negative $516 billion, a decrease of almost $1 trillion since 2003
  
• Consumer households have most of their money in deposits; however the share of such has decreased 3% since 2002 while the utilization of mutual funds has increased 7%
  
• Consumers have over $9 trillion of assets in stocks and mutual funds
  
• Consumer households have $92 billion in checkable deposits & currency, a decrease of over 70% since 2002
  
• Consumer households have over $6 trillion in bank accounts, an increase of over 25% since 2002
  
• Consumer households have $5.3 trillion in time & savings, an increase of over 40% since 2002
  
• Consumer households have $1.1 trillion money market assets, relatively flat since 2002
  
• Consumer households have $64 billion in other bank accounts, a decrease of 2% since 2006
  
• Consumers households assets held in brokerage accounts have increased 50% since 2002 to $16.2 trillion
  
• Consumer households have decreased their share of their brokerage account investable assets in equities and have increased utilizing mutual funds, with both accounting for two-thirds of brokerage account assets under management
  
• Consumer household have over $5 trillion in equities, an increase of 20% since 2002
  
• Consumers have invested $12 trillion of their investable assets & retirement plan assets in equities
  
• Only 10% of consumer households rely strictly on individual equity, down one-third since 1999
  
• Consumer households have $3.2 trillion in bonds, an increase of 45% since 2002
  
• The number of consumer households’ investing in mutual funds is staggering; over 50 million consumer households own mutual funds
  
• Mutual funds’ consumer household penetration is 44%, down 12% from 2002’s penetration
  
• Over 80% of consumer households with incomes over $100,000 are invested in mutual funds, as compared to the 15% with less than $25,000
  
• Open-end mutual funds assets under management are over $9 trillion
  
• Over half of mutual fund assets are stock funds
  
• Collectively, mutual funds, unit investment trusts, exchange traded funds, and variable annuities assets under management equate to $11.6 trillion
  
• Consumer household mutual fund net flows have increased over 250% since 2001
  
• Annuity assets have been growing rapidly in recent years to nearly $2 trillion
  
• There is nearly $17 trillion of life insurance in force, which has been constantly increasing over the years
  
• Almost four-fifths of all consumer household investable assets are in taxable accounts. Taxable accounts have been slowly falling 3% since 2002 to 83%
  
• Over 45 million consumer households own IRA accounts, up 50% since 1996
  
• The amount of consumer household assets in IRA accounts has grown considerably over the past decade, reaching over $4 trillion
  
• Consumer households have $3.8 trillion in traditional IRA accounts, an increase of 65% since 2002
  
• Consumer households have $219 billion in SEP & SAR-SEP IRA accounts, an increase of over 80% since 2002
  
• Consumer households have $178 billion in Roth IRA accounts, an increase of over 200% since 1998
  
• Consumers have $12.2 trillion in retirement plan assets, an increase of almost 50% since 2002
  
• Consumer households’ retirement plan assets are distributed mostly between government pension plans, private defined benefit plans, and defined contribution plans, with annuities only accounting for a little more than 10% of assets
  
• Consumer households have $1.6 trillion in annuities, an increase of 60% since 2001
  
• Consumer households have $4.2 trillion in defined contribution plans, an increase of almost 70% since 2002
  
• Consumer households have $2.3 trillion in private defined benefit plans, an increase of 35% since 2002
  
• Consumer households have $4.2 trillion in government pension plans an increase of 45% since 2002
  
• Consumer households have $35 trillion in financial assets, an increase of almost 50% since 2002
  
• Consumer households have $27 trillion in personal assets, an increase of almost 50% since 2002
  
• Consumer households’ personal assets are dominated by residential real estate assets, accounting for over 80% of assets
  
• Consumer households have over $7 trillion in other illiquid assets, an increase of over 50% since 2002
  
• Consumers have $13.4 trillion of household liabilities, an increase of over 50% since 2002
  
• The key lending market is mortgages, followed by personal credit, investment financing, and small business financing
  
• Mortgages, account for almost three-fourths of consumer liabilities
  
• Consumer household home mortgage debt outstanding has increased to nearly $10 trillion
  
• Consumer households have over $56 trillion in net worth, an increase of almost 50% since 2002
  
• Consumer households’ non-real estate net worth is nearly $30 trillion, an increase of over 40% since 2002
  

The Solution: Baby Boomers’ Liquefaction

This section addresses baby boomers’ likely liquefaction:

• The future of consumer wealth is better understood if one grasps the impacts of the misleading savings rate, pending liquefaction, and the importance of leverage
  
• The consumer savings rate can be misleading because it excludes taxable account capital gains, as well as 401k plan contributions & capital gains, real estate investments & capital gains, and small business investments & capital gains, many of which can provide retirement assets
  
• The oldest baby boomers just turned age 62 and hence they are starting the retirement movement; retirement will lead to liquefaction
  
• Liquefaction is when substantial new wealth has been created but not realized in the count for investable assets or the savings rate
  
• Baby boomers pending retirement will drive more assets into the investable assets market
  
• The solution to the perceived savings crisis is baby boomers liquefaction, which include four components, retirement plan rollovers, stock option & restricted shares exercises, residential real estate sales, and small business sales
  
• Upon retirement, baby boomers will liquefy about $13 trillion of dollars previously in illiquid assets, increasing investable assets to $35 trillion by 2015
  
• Consumer household net worth will increase to over $73 trillion by 2012
  
• Consumer household assets will increase to over $90 trillion by 2012
  
• Consumer household liabilities will increase to over $19 trillion by 2012 as Generation X consumers continue to take out debt to purchase personal and illiquid assets
  
• Baby boomers will rollover about eight trillion of dollars from company sponsored retirement plans to individual retirement accounts as they retire
  
• Nearly three-quarters of recent retirees have either reinvested their 401k into an IRA or are exploring options to move their funds to a new provider
  
• In any given year, as much as 25% of a broker’s or an advisor’s client base could be eligible for an IRA rollover
  
• There are nearly 50 million consumers with 401k’s
  
• The share of consumers taking their retirement plan distributions in IRA rollovers has been increasing
  
• IRA rollover assets are also heavily concentrated with 4% of accounts controlling 85% of the assets
  
• Advice is increasingly needed for 401k plans; almost half of employees who take a distribution choose a cash distribution rather than directing a rollover into an IRA or other qualified plan
  
• The substantial rollovers to come will push the IRA market to $5 trillion in assets by 2010
  
• Baby boomers will cash in substantial stock option and restricted shares as they retire
  
• Almost half of the largest companies offer their employees stock option plans
  
• Stock-option awards for CEOs have been cut sharply, falling 41%
  
• Also, stock-option awards for lower-level staff have been cut sharply as well, falling 53%
  
• Restricted stock awards to CEO’s climbed 69% since 2001
  
• Some baby boomers will sell residential real estate in order to retire
  
• Nearly half of consumers have taken steps to retire abroad or are considered retiring to abroad
  
• While almost one-third of pre-retirees expect to relocate and/or downsize their house in retirement, less than one in ten actually do so
  
• Baby boomer’s three primary reasons for moving during retirement are downsizing, being closer to family, and relocating to warmer climate
  
• Because of rising home values, consumers believe that the equity in their homes will take care of their retirement needs
  
• Some homes bought recently have had equity values fall into the negative territory
  
• The value of consumers’ small businesses and second homes is expected to fall as boomers get older
  
• Home prices in the United States could collapse by 2015 with the exit of baby boomers from the workforce, along with the concurrent drop in productivity decimating the housing market
  
• Baby boomers will sell the vast number of small business when they retire
  
• Business owners commonly view the companies they have built as their retirement plans

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Tiburon Strategic Advisors