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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: Knighty Tin who wrote (205210)	11/19/2002 11:09:45 AM
From: ild	Read Replies (2) of 436258

KT, I sent an e-mail to Steve Roach in which I asked him about how he came up with this: For older baby-boomers (ages 55-64), my colleague John Scowcroft calculates that the median family currently has a negative net worth to the tune of $173,000; for the 9.6 million families in this cohort, that amounts to an aggregate shortfall of $1.7 trillion. Today I got a reply from Mr. Roach: I will pass this on to my collaegue, John Scowcroft, who uncovered this nugget for us. Best regards, S. Roach and an e-mail from John Scowcroft: Greetings....we'd be happy to review this with you. Let us know how to reach you. The estimate was a snapshot of today's balance sheet net of the impending retirement liability. The main exercise we went through was to: -find out the net worth of the age cohort from sources such as Fed Reserve Board. This included insurance, real estate and as many assets as we could find, as well as debts. -add in PV of social security benefits. -then subtract the PV of expenses of retirees per AARP estimate of 75% of income (the "retirement liability") The way the hole will be filled is through the net value of the individuals' human capital, which could be estimated by the present value of net earnings. This value is based on behavioral responses which we do not predict, but analyze via sensitivity analysis. The human capital will be monetized and applied towards retirement through responses that could include political action leading to a government action. We have created some scenario calculations to model the different responses which retirees may take to dig themselves out of today's hole. These include, but are not limited to: -grow assets through investing -grow assets through savings -work longer than age 65 at some income level/savings rate -cut retirement expenses The purpose of the snapshot is to provide a road map for the asset management industry to anticipate and prepare for behavioral response individuals may make, including and especially saving and investing. We can provide more details if you wish. John.

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