Key Findings
This report outlines consumers & their savings objectives, defines baby boomers 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. Below is a set of factual highlights from this report:

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 400% since 1900
  
• The number of consumers grows by one person every ten seconds, almost 50% faster than the 14.5 seconds in 1967
  
• The number of consumers grows about 1% per year
  
• The number of consumers per square mile has steadily increased to 78, up 400% since 1900
  
• The worldwide consumer population is 6.5 billion, up almost 100% since 1967
  
• There are over 4.0 million births every year, up one million since the 1973 to 1975 bottom, and again equivalent to its 1957 to 1960 peak
  
• Almost 2.4 million consumers die each year, up 100% since 1920 to 1930 and up 800% since 1900
  
• The consumer death rate includes a death every thirteen seconds
  
• The net consumer birth rate has decreased to 1.7 million from 2.6 in 1960 due to a stagnant birth rate but increasing death rate
  
• Immigrants accounts for 1.0 million new consumers each year
  
• There are 12.0 million illegal consumer immigrants, up 30% since 1999
  
• There are 117 million consumer households, an increase of 10% since 1997. Consumer households have remained relatively steady since 1997; however consumer households jumped almost 5% between 2001 and 2003
  
• The average consumer household includes 2.6 consumers, down almost 50% since 1915, but relatively flat since 1999
  
• 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
  
• Over one-quarter of consumers said that having enough money for future health care was a major concern
  
• 65 year old couples retiring in 2008 will need $225,000 to cover medical costs in retirement, up 40% since 2002
• Over three-quarters of affluent consumers list retirement as a primary savings goal
  
• Full-service broker clients are saving for retirement or their children or grandchildren’s education
  
• Fee-based financial advisor clients say that retirement is their primary savings 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:

• Financial advisors say that baby boomers’ retirement is the issue currently having the greatest impact on their businesses
  
• Consumer households can be categorized into four age-based segments, including the World War II generation, Baby Boomers, Generation X, and Generation Y
  
• One-quarter of consumers are baby boomers, down slightly since 2005
  
• The number of consumers between 55 and 64 years old is expected to grow the fastest at about 4% per year
  
• Consumers over the age of 55 control over three-quarters of consumer investable assets
  
• There are 78 million baby boomers, an increase of 1.0 million since 2006
  
• Almost half of fee-based financial advisor clients are baby boomers
  
• Over three-quarters of independent rep clients are baby boomers
  
• Assets held by consumer over 60 years old have nearly doubled since 2001 to $4.6 trillion in 2005
  
• Assets held by consumers over 60 years old are expected to increase to $10.1 trillion by 2012
  
• 76 million baby boomers will retire in the next two decades
  
• The average expected retirement age has been getting older, now at 65 up from 62 in 1996
  
• Almost half of currently employed consumers aged 50 and older expect to continue working into their seventies
  
• Not having enough money is still the leading cause for postponing retirement
  
• Changes in Medicare, Social Security, pension plans, and benefits are causing older consumers to work longer
  
• 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
  
• Retirees rely on personal savings & investments, Social Security, defined benefit plans, defined contribution plans, & other sources
  
• Almost all retirees rely partially on Social Security and defined contribution plans
  
• Nearly half of retirees utilize Social Security as their largest source of income
  
• Consumer households have a median retirement savings of $22,500
  
• Consumers expect to replace 58% of their income in retirement, an amount that has been relatively steady in recent years
  
• Three-quarters of retirees have less than $25,000 in savings & investments
  
• Over three-quarters of baby boomers over the age of 55 have less than $100,000 of investable assets
  
• The median retirement savings balance of consumers over 60 is only $42,000; many do not have enough money to live comfortably for more than a handful of years
  
• Two-thirds of consumer households have saved less than three months of living expenses
  
• About 40 million households control 90% of all investable assets
  
• There are almost five million consumer households with $1million to $5 million in investable assets, down since the peak in 2000 – 2002 and since 1997
  
• Consumers can no longer count on company pension plans
  
• The number of defined benefit plans has declined rapidly to 32,000, down two-thirds since 1985
  
• The number of defined benefit plans declined for several reasons, including over funding, high administrative costs, pension benefit guaranty group premiums, and younger work forces
  
• The typical defined benefit plan invests nearly two-thirds of its assets in equities
  
• Defined benefit plans are more costly than defined contribution plans for businesses to implement, hence providing greater profit margins to administrators
  
• 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
  
• The median annual pension payout is only $8,340
  
• The number of 401k plans has exploded over the last twenty years to 432,000, up over 2,000% since 1984
  
• Among employees with access to 401k plans, almost half claim they cannot afford to contribute to the plan
  
• The average participant balance in a 401K plan has fallen to $20,000, mostly due to poor market performance, and participant withdrawals
  
• A typical 401k or IRA provides just $300 per month during retirement
  
• More than three-quarters of baby boomers expect to receive Social Security benefits
  
• Two-thirds of workers don’t expect that Social Security benefits will still be available when the last baby boomer retires in 25 years
  
• Less than one-third of currently employeed individuals expect to depend on Social Security in retirement
  
• 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 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 eventual privatization of Social Security would benefit baby boomers
  
• Few consumers believed that the government would privatize Social Security
  
• The privatization of Social Security could have a moderate impact on financial services industry revenues, creating between $39 and $279 billion in fees over the next 75 years
  
• Medicare is expected to be bankrupt by 2019
  
• Consumer income has increased over 30% since 2001 to $12.3 trillion
  
• Nearly one-half of the income of men 65 years old and older is generated by wages & salaries
  
• Consumers often begin retirement planning in their 50s
  
• Nearly half of baby boomers say that they have $1 million or more saved for retirement
  
• Program sponsors and money managers do not see the fluctuation in the savings rate as having a sizable impact on their businesses
  
• One-third of consumers do not feel secure with their personal finances
  
• Almost half of consumer believe that they do not have enough money to live comfortably in their retirement years
  
• One-third of consumers say that they lack confidence in managing their investments
  
• 401k contribution limits have increased to $15,500 in 2008, from $10,500 in 2001
  
• Many believe that there will be an inheritance boom over the next 20 years of $17 trillion
  
• The risk of dying too young is increasingly being replaced by the risk of living too long, with life expectancies now averaging 78 years, up 80% since 1900
  
• The three primary reasons for the explosion in life expectancy are advances in medication and sanitation, and the reduction of poor behaviors such as smoking
  
• The number of years spent in retirement has been increasing since 1950
  
• 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:

• Consumer households have over $25 trillion of investable assets, over $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 household investable assets net flows have decreased to negative $516 billion, a decrease of almost $1.0 trillion since 2003
  
• 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%
  
• About one-fifth of consumers’ investable assets are now in cash instruments
  
• Consumers have over $9 trillion of assets in stocks and mutual funds
  
• 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
  
• Consumer households have $5.9 trillion in time & savings, an increase of almost 60% since 2002
  
• Consumer household time & savings net flows have increased 15% since 2006 to $422.8 billion
  
• Consumer households have $1.3 trillion money market assets, relatively flat 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
  
• Consumers have invested $12 trillion of their investable assets & retirement plan assets in equities
  
• Consumer households have $3.9 trillion in bonds, an increase of 45% since 2002
  
• Consumer households have $1.5 billion in corporate & foreign bond assets, an increase of over 80% since 2002
  
• Consumer households have almost $800 billion in treasury securities assets, a decrease of over 10% since its high in 2004
  
• Consumer households have over $900 billion in municipal securities assets, an increase of almost 30% since 2002
  
• Over 88 million consumers own mutual funds, up from 87.9 million in 2006, down 4% since 2004, and flat since 2000
  
• Mutual fund & unit investment trust assets under management total $12.7 trillion
  
• Mutual fund net flows reached $884 billion, up nearly 90% since 2006
  
• Consumer households have $1.6 trillion in annuities, an increase of 60% since 2001
  
• Consumer households have over $1 trillion in life insurance reserves, an increase of one-third since 2002
  
• Consumer household 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 contribute $12.3 billion to their IRAs, a decrease of over 10% since 1996
  
• Consumers have $12.7 trillion in retirement plan 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 have $22.5 trillion in residential real estate assets, an increase of over 50% since 2002
  
• The median home price has sky rocketed to $220,000, up 1,100% since 1970 but down slightly since 2005
  
• Consumer households have over $7 trillion in other illiquid assets, an increase of over 50% since 2002
  
• The small & medium sized business market is huge; there are over 20 million small & medium sized businesses
  
• Over 7.0 million consumer households utilize subprime mortgages
  
• Consumer households’ subprime loans outstanding increased almost 300% between 2003 and 2007 to $1.3 trillion
  
• Consumer household credit debt outstanding has increased to over $2.0 trillion
  
• Consumer debt per household hit a record high of nearly $20,000
  

Future Predictions

This section addresses a series of predictions:

• 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 number of consumers is expected to grow to over 400 million by 2043, up 100 million since 2007
  
• The majority of consumer households will continue to have dual financial concerns around needing retirement income and not outliving their investments
  
• Many consumers will seek a retirement pay check via their investments
  
• The consumer savings rate will likely continue to be near 0.1% until 2012
  
• Upon retirement, baby boomers will liquefy about $13 trillion previously in illiquid assets, increasing investable assets to $38 trillion by 2015
  
• Consumer household investable assets will increase to over $35 trillion by 2012 as baby boomers liquefy their retirement, personal, and illiquid assets as they retire
  
• 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
  
• Nearly 17 million consumer households have rolled over assets from an employer-sponsored retirement plan to a traditional IRA
  
• Consumers are increasingly using self-directed IRA accounts
  
• Baby boomers’ homes are worth $27.5 trillion, up 5% in 2007
  
• The number of consumers with negative home equity has increased 600% since 2005 to 12.1 million
  
• Two-thirds of baby boomers are dependent on their homes as a retirement asset
  
• The generational housing bubble will be fueled by baby boomers who have bid up prices since 1970 as they moved higher and higher on the housing ladder
  
• Baby boomers will likely cause stagnation in many housing markets, particularly in the suburbs
  
• Baby boomers will tend to become sellers rather than buyers of houses
  
• Almost 50,000 homes were foreclosed upon in the first quarter of 2008, up 400% since the first quarter of 2007
  
• One of every 538 consumer households received a foreclosure notice in March 2008 alone
  
• Foreclosures will continue to rise in the third and fourth quarter
  
• There are 6.0 million private businesses
  
• Regardless of assets under the expected sales, private business valuations will increase to $10 trillion by 2012
  
• There will be substantial immigrant impacts, including saving Social Security & Medicare, and saving the housing, private business, and stock markets
  
• Some believe that immigrants (especially illegal immigrants) have saved Social Security because they pay taxes but receive no benefits
  
• Immigrant consumers will buy over one-third of homes
  

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Tiburon Strategic Advisors