Tom Sedoric and Casey Snyder

Regular readers know that we are not shy about tackling controversial issues that impact both our clients and the larger society. The very real and potential generational battle about the future is one deserving of thoughtful consideration and discussion. This subtle clash is in the form of an inter-generational conflict between baby boomers and their successor generations, a battle that does not (so far) attract daily headlines. This potential for conflict is nonetheless real and consequential. 

We all know the saying ‘kicking the can down the road’ about delaying vital personal or political decisions set aside for another day or, perhaps, even another decade or century. We could list hundreds of deferred decisions that impact individuals personally, economically and socially: low retirement savings, misdirected spending, a lack of political discipline regarding infrastructure and the inflated cost of education, or real pension and entitlement reform. The headlines appear every day but the can keeps getting kicked down the road in hopes that someone else – inspired leadership or a new generation of super heroes – will come along like the U. S. Calvary to save the day. It is natural to assume “adults are in charge” even when they aren’t. 

But what happens when the can kicks back? 

  • Imagine, hypothetically, a 30-year-old paying 7% on a federal student loan during an era of historically low interest rates, unable to afford their first home and having delayed marriage and family formation. Ask if they are open to paying significantly more in real estate taxes in 10 years to help fill a state pension deficit so retirees can afford their cost of living adjustment. 
  • Should so many retirees assume their promised benefits, while grossly underfunded, are guaranteed? One need ask the public workers in Detroit. 
  • Now that millennials outnumber baby boomers, why should a millennial vote in favor of funding retiree benefits (which are unlikely to be solvent when the millennial eventually retires) if it means less take home income for themselves during a stage of their lives when education, healthcare, and housing are disproportionally unaffordable? 

Consider the provocative essay “How the Baby Boomers Destroyed Everything” written by venture capitalist Bruce Cannon Gibney that ran in the Boston Globe in 2016. In his broad diagnosis of the 2016 election and what it laid bare, Gibney said “The root illness remains undiagnosed, but here it is: the baby boomers, that vast generation of Americans born in the first two decades after World War II. The body politic rests on the slab because boomers put it there, because decades of boomerism produced the problems and disaffection of which 2016 was merely the latest expression.” 

Gibney’s scathing indictment is the can kicking back. “Boomers weren’t genetically predestined to be dysfunctional; they were conditioned to be,” he wrote. “They were the first generation to be raised permissively, the first reared on television and subject to its developmental harms, and the only living group raised in an era of seemingly effortless prosperity.” 

In short, with an average of 10,000 baby boomers retiring daily, Boomers are running up huge societal and financial bills that will land in the inboxes of their children, grandchildren and others down the line. Whether it is fair or not, and almost irrelevant of political persuasion, the baby boomers may have unintentionally rigged the system to their advantage in terms of tax, pension and public policies. Perhaps more frustrating: for the first time since the Great Depression, the retiring generation is not passing on to the successor generations a healthier standard of living or better economic promise. 

This is not about blaming baby boomers. We do not believe there was a calculated or sinister conspiracy to fleece the future. It was more about a lack of financial literacy, civics education, introspection and personal responsibility. As a famous World War II veteran and mentor of Tom’s once noted with remorse, the baby boom generation was unintentionally sheltered from the horrors experienced at war – they grew up with the freedoms of victory, but without the hardship. 

These brewing generational tensions help explain the very economic landscape we inhabit and for which we must plan. For example, the single-minded focus on college education has led, quite predictably, to soaring education costs and a student loan debt crisis. This was fine for much of the baby boom generation whose education costs were almost miniscule compared to today’s costs. Not so fine for the millennials and succeeding generations. 

Over the past decade, the country has exchanged a housing bubble for a student loan debt bubble that “has grown by 170 percent, to a whopping $1.4 trillion — more than car loans, or credit card debt.” 44 million Americans have student loans and eight million of these borrowers are in default. The next generations are beginning to understand the potential implications of what has transpired and the potential impact on their present and future. 

Looking ahead, we believe savers and retirees need to realistically account for a much greater degree of uncertainty than most find comfortable. We also must emphasize the importance of intergenerational communication surrounding policy and benefit programs. Insolvent programs need to be discussed before it is too late; otherwise, they risk alienating the next generation of contributors at a time when retirees will need them most. If the can kicks back, even AARP may not be able to fix this clash.

This information has been obtained from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. The views expressed are those of Tom Sedoric – Partner, Executive Managing Director and Wealth Manager and D. Casey Snyder, CFP® - Partner, Senior Vice President and Wealth Manager and are not necessarily those of Raymond James. Steward Partners Global Advisory LLC and The Sedoric Group maintain a separate professional business relationship with, and our registered professionals offer securities through, Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Steward Partners Investment Advisory LLC. 2985754