Baby Boomers Are Jamming Retirement Traffic – So What Now?

The story goes like this: Between 1946 and 1964, a bunch of American parents made an estimated 70 to 80 million babies. This baby boom has been very good for America as a whole. That’s because, as you’d expect, these babies needed things like food, clothing, toys, and education…and they grew up to become doctors, lawyers, police officers, teachers, factory workers, and fire fighters…and they bought houses, cars (and SUVs), computers, clothes… and they all pay taxes–Uncle Sam was definitely looking forward to that day.

That was a crash course in Macroeconomics, but it provides a fairly good idea about what an awesome impact the baby boomers (and all other generations, for that matter) have had on our economy.

However, if you do some quick math, you’ll realize that some of these 70 to 80 million boomers are starting to turn 65. In fact, beginning January 1, 2011, and for the next 19 years, an estimated 10,000 baby boomers will turn age 65 – GET THIS – daily! That’s one boomer reaching retirement age every 8 seconds for the next 19 years straight!

Here’s why this trend could cause huge tax problems for you:

By turning 65 years old, these baby boomers become eligible for Medicare. “So what’s the big deal?” you may ask. “They’ve paid into Medicare all their working lives for this very day.” You’re correct on the part about their paying in. But the federal government has not been holding those payments in an account so that they can be used for Medicare payments once they turn 65. That’s the theory in principle, but the reality in Washington, D.C. is actually quite different.

As a matter of fact, as we speak, Medicare is saddled with an approximately $23 trillion unfunded liability problem. That’s the difference between the benefits promised and the tax revenue actually being paid into the program today. As crazy as this may sound, the reality is that the federal government never kept those taxes that were deducted from these baby boomers’ (or anyone else’s) paychecks.

Just so we are clear, I’m not suggesting that these retiring boomers will be denied their benefits, because I don’t believe that in the slightest sense. However, this leaves only one option – bringing in enough revenue today to cover the benefits for the enormous generation of retiring baby boomers. Here’s the kicker: 100 percent of that revenue must come from taxes!

Now, in the face of this new reality, where would you think tax rates are headed? Up, of course! No realistic individual would dispute this. Yes, we have an extension of the historically low tax rates for two more years. But don’t forget that Congress refers to those rates as “a temporary extension.” Also, you can’t ignore the Congressional Budget Office’s conclusion to a May 2008 report, titled The Long-Term Economic Effects of Some Alternative Budget Policies, which sought to address the financial outlook of Medicare, Medicaid, and Social Security: “…At some point, policymakers will have to increase taxes…”

Would a Tax Hike Ruin Your Retirement?

401(k)s and tax-qualified plans, in general, do not postpone your taxes forever. And higher taxes mean much less money for you to live on in retirement or ultimately transfer to your heirs. Waiting for tax rates to increase before trying to change gears may be a terrible idea. Whether you are already retired or retirement is still down the road, I’d recommend having a serious conversation with your financial counselor about legitimate options you could employ today to ensure that your retirement assets are immune from looming tax increases so that you can keep more of your hard-earned dollars. Fact is, such options do exist in our current Tax Code so please, don’t accept “hope for the better” as a viable solution.


Samuel N. Asare is the senior strategist at Laser Financial Group. His practical, straight-forward, and superb ability to simplify often-complex strategies has made him a regularly featured expert in various regional and national media outlets, including TV and radio. Samuel is the celebrated author of four personal finance books and the acclaimed Proven , Common-Sense Wealth Building blog.  He holds an MBA and is a Chartered Retirement Planning Counselor, a Charted Mutual Fund Counselor, a Certified Treasury Professional, and a Certified Business Manager. For more retirement insights, visit, or connect at


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Samuel Asare MBA, CRPC, CMFC, CTP

Samuel Asare MBA, CRPC, CMFC, CTP

Samuel N. Asare is the senior strategist at Laser Financial Group, a regular columnist/commentator for various national and regional publications, author of Proven , Common-Sense Wealth Building blog, and four personal finance books. He holds an MBA and is a Chartered Retirement Planning Counselor, a Charted Mutual Fund Counselor, a Certified Treasury Professional, and a Certified Business Manager. To get more straight-forward retirement insights, visit, or connect at

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