Key Highlights
This report outlines consumers & their savings objectives, defines baby boomer and summarizes the case for their pending saving crisis, addresses the flow of funds within households and provides the real facts on the state of consumer wealth, and addresses baby boomers’ likely liquidation.

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

• There are over 300 million consumers, an increase of over 10% since 1999 and almost 1% per year
  
• The consumers grow about 1% per year
  
• There are over 4.0 million births every year, an increase of one million since 1975, reaching its peak from 1957 – 1960
  
• Almost 2.4 million consumers die each year, an increase of one million since 1930
  
• The net consumer birth rate has decreased to 1.6 million from 2.6 in 1960 due to stagnant births but increasing deaths
  
• About 30 million consumers immigrate each year, an increase of over 80% since 1990
  
• There are over 117 million consumer households, an increase of 10% since 1997
  
• The average consumer household has 2.5 consumers, relatively stagnant since 2002
  
• Almost half of consumers list retirement as their primary financial concern
  
• Over one-third of affluent consumers list retirement planning as their most pressing 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
  
• Full-service broker clients are saving for retirement or the education of their children or grandchildren
  
• Only fee-only financial advisor clients name retirement as their primary saving goal
  
• Independent rep clients name retirement as their primary savings 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
  
• Consumer households are primarily led by consumers in four age-based segments, including the World War II generation, Baby Boomers, Generation X, and Generation Y
  
• Consumer births peaked between 1953 and 1964, when 4.0 to 4.3 million people were born each year, up hugely since 1940 when only 2.6 million were born
  
• One-quarter of consumers are baby boomers
  
• There are 78 million baby boomers, an increase of 1.0 million since 2006
  
• The share of consumers over age 50 has increased to 30% from 28% in 2003
  
• The number of consumers over the age 65 has increased to 38 million from 35 million in 2003
  
• Two-thirds of consumers now expect to retire at age 65 or later
  
• Almost half of consumers believe they will retire between the ages of 65 and 72
  
• Almost three-quarters of workers have retired before age 65
  
• Interestingly, two-thirds of consumers are not concerned about being forced into retirement
  
• One-half of retirees under the age of 60 retired involuntary
  
• Two-thirds of consumers are very or somewhat confident about their financial situation when retiring; many of these may be overconfident
  
• Two-thirds of involuntary retirees expect retirement to be better than their parents
  
• Less than one-third of consumers that do retire on their timetable are still financially challenged
  
• Amongst two-thirds of consumers that are retired are simply trying to make ends meet
  
• Three-quarters of baby boomers feel that they are not financially prepared to retire
  
• Only one-half of baby boomers with income greater than $100,000 feel they are prepared to retire
  
• The perceived baby boomers savings crisis is due to six factors, including the decline in pension plans, the social security challenges, the stagnant savings rate, the lack of World War II generation wealth transfer longer life expectancies, and the concentration of consumer wealth
  
• About 40 million households control 90% of all investable assets
  
• More specifically, moderate and high net worth consumers control over half of all investable assets
  
• The number of defined benefit plans has declined rapidly to 32,000, down two-thirds since 1985
  
• About half of public employee pension plans are under funded
  
• The number of defined contribution plans now dominates the number of defined benefit plans
  
• The number of 401k plans has exploded over the last twenty years to 432,000, up over 2,000% since 1984
  
• Over three-quarters of consumers participate in their company’s retirement plan
  
• Three-quarter of consumers utilize 401k plans
  
• The social security act of 1935 was created to pay workers age 65 and older a continuing income after retirement
  
• The number of consumers collecting social security account for 47 million, an increase of almost 40% since 2006
  
• Only one-fifth of currently retired individuals rely primarily on social security for income
  
• The average retired worker can expect to receive approximately $1,000 per month from social security, an increase of almost 15% since 2004
  
• The number of workers per social security recipients has decreased significantly between 1940 and 2004
  
• Consumer income has increased over 30% since 2001 to $12.3 trillion
  
• Consumer households’ disposable personal income has increased over 35% since 2001 to $10.3 trillion
  
• Consumer households’ personal current taxes decreased 20% between 2001 and 2004, but have increase over 35% since 2004 to $1.5 trillion
  
• Consumer households’ employee social security contributions have increased 30% since 2001 to $480 billion
  
• Consumer median income has increased to almost $60,000, an increase of over 45% since 1997
  
• Household consumer personal savings has decreased since 2004 to negative $900,000
• 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
  
• Nevertheless, less than one-quarter of all baby boomers have received an inheritance
  
• 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
  
• The risk of dying too young is increasingly being replaced by the risk of living too long, with life expectancies now averaging 77 years
  
• The average life expectancy of a 65 year old consumer is 85
  
• The number of years spent in retirement has been increasing since 1950
  

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 $25 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
  
• Consumers households have over $25 trillion in investable assets, an increase of over 50% since 2002
  
• Consumer households have two-thirds of their investable assets in brokerage accounts
  
• Consumer households have the largest share of their investable assets in deposits, however the share of such has decreased 3% since 2002 while the utilization of mutual funds has increased 7%
  
• There is $820 billion dollars of US currency in circulation an increase of 116% since 1995
  
• Consumer households have $78 billion in checkable deposits & currency, a decrease of three-quarters since 2002
  
• Consumer household have over $7.0 trillion in bank accounts, an increase of over 100% since 2002
  
• Consumers households assets held in brokerage accounts have increased almost 60% since 2002 to $17.1 trillion
  
• Consumer households have over $5 trillion in equities, an increase of 20% since 2002
  
• Consumer households have $3.9 trillion in bonds, an increase of 45% since 2002
  
• Consumer households have $1.6 trillion in annuities, an increase of 60% since 2001
  
• Over three-quarters of all consumer household investable assets are in taxable accounts
  
• 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 IRA account assets are dominated by traditional IRAs, with other IRA types accounting for less than 10% of IRA account assets
  
• 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
  
• Consumer households have $51 billion in simple IRA accounts, an increase of over 1,000% since 1998
  
• Consumers have $12.7 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 retirement plan assets net flows have increased over 80% to $216 billion
  
• Consumer households have over $37 trillion in financial assets, an increase of almost 50% since 2002
  
• Consumer households’ financial assets allocation has been relatively stagnant since 2002, with investable assets accounting for two-thirds of financial assets and retirement plans accounting for the other one-third
  
• 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 $22.5 trillion in residential real estate, an increase of over 50% since 2002
  
• Consumers households have $9.6 trillion in real estate equity, a decrease in 10% since 2006
• Consumer households residential real estate value consists of almost two-third construction value and one-third land value
  
• Consumer households have over $7 trillion in other illiquid assets, an increase of over 50% since 2002
  
• Consumer household other illiquid assets net flows have increased 100% since 2005, however they remain negative
  
• Consumer households have over $72 trillion in household assets, an increase of 50% since 2004
  
• Consumers have $14.4 trillion of household liabilities, an increase of over 60% since 2002
  
• Consumer household home mortgage debt outstanding has increased to nearly $10 trillion
  
• Consumer household credit debt outstanding has increased to over $2.0 trillion
  
• Consumer households have $1.2 trillion in other liabilities, an increase of 50% since 2002
  
• Consumer household average expenditures have increased over 30% since 1997 to $46,000
  
• Consumer households spent almost half of their income on investments and housing, which has been relatively steady since 1997
  
• Consumer households have over $57 trillion in net worth, an increase of almost 50% since 2002
  

The Solution: Baby Boomers’ Liquidation

This section addresses baby boomers’ likely liquidation:

• The future of consumer wealth is better understood if one grasps the impacts of the misleading savings rate, pending liquidation, 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 liquidation
  
• Liquidation 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 liquidation, 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 $38 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
  
• As baby boomer retire, investable asset will increase greatly as they liquefy retirement, personal, and illiquid assets, while Generation X consumers will increase their liabilities due to an increase of debt in order to purchase personal and illiquid assets
  
• Baby boomers will rollover about $8 trillion of dollars from company sponsored retirement plans to individual retirement accounts as they retire
  
• The share of consumers taking their retirement plan distributions in IRA rollovers has been increasing
  
• IRA rollovers attract three-quarters of assets distributed from defined contribution plans
  
• The number of consumers rolling assets over into an IRA has increased nearly 15% since 2000
  
• The IRA rollover market is booming, with over $300 billion rolling over each year. After falling from $200 billion in 1999 to the bottom of $159 billion in 2002, the IRA rollover market has already seen tremendous growth
  
• The IRA rollover market will increase from $278 to $538 billion in assets under management by 2012
  
• Consumer household retirement plan assets will increase steadily to over $14 trillion by 2012
  
• 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
  
• Some baby boomers will sell residential real estate in order to retire
  
• Median existing home prices have remained relatively stagnant at $216,000, up just 8% since 2002 and 30% since 2000
• Median new home prices have remained stagnant at $247,000
  
• The number of home sales has dropped 10% to 6.4 million from 7.5 million in 2006
  
• The numbers of existing home sales have dropped to 5.0 million from its high in 2005 at 7.0 million
  
• Almost half of boomers plan to move in their retirement years
  
• Three-quarters of baby boomers expect to buy a new home when they retire
  
• One-quarter of baby boomers own another form of real estate besides their homes
  
• Over one-third of baby boomers will move or plan to move when they become empty nesters
  
• Almost three quarters of consumers will spend the rest of their lives in the place where they lived at the time of their 65th birthday
  
• Two-thirds of baby boomers are dependent on their homes as a retirement asset
  
• Almost all baby boomers believe that owning homes is a smart financial investment
  
• Consumers 65 years of age and older have almost one-third of their assets in real estate
  
• Over three-quarters of baby boomers own homes
  
• Ultimately, 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 retiring will cause an increase in sellers of houses and decompressing of housing prices
  
• Baby boomers will tend to become sellers rather than buyers of houses
  
• The median value of homes may decrease to $202,000 as baby boomers retire and sell their homes
  
• Baby boomers will sell the vast number of small business when they retire
  
• There are 10,500 businesses sold each year
  
• Small business assets have increased rapidly since 2002 to $7.5 billion
  

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Tiburon Strategic Advisors