Boomers aren't saving enough, and retirement will be costly

The Ticker

March 13, 1998|By JULIUS WESTHEIMER

HERE ARE financial figures we hope you will find helpful:

A PENNY SAVED: "If you are one of the 77 million baby boomers, you aren't saving enough. According to the American Association of Retired Persons, even the top 10 percent of income earners in the United States have saved and invested only $66,000 -- not exactly a fat retirement cushion." (Worth, April.)

LOOKING AHEAD: Local investment adviser Morry Zolet sends these numbers: If you retire today with a $40,000 annual income, you will need $87,912 per year, 25 years from now, at a 3.2 percent annual inflation rate, to maintain your present living standard. At 4 percent inflation, you will need $106,000 a year.

INFLATION FIGHTER: "Yields on 10-year inflation-indexed Treasury bonds (TIPS) are 3.73 percent over the inflation rate. Since World War II, the average bond return -- after inflation -- was only 2.04 percent, so TIPS look attractive. With today's inflation at 1.7 percent, 10-year TIPS have a total return of 5.43 percent. If inflation heads up from current low levels, TIPS' yields will rise while other bonds will lose value." (Money, March.)

BUY LOW, HOLD ON: Want to make money in Asian stocks? Burton Malkiel, Princeton University economics professor, states that stocks in emerging Asian markets now show price-earnings ratios below 10, compared with U.S. ratios where the average is around 20. "Buy when stock prices are abnormally low -- like now," urges Malkiel.

NUMBERS NOTES: "Stock prices of companies that raised dividends gained 8 percentage points over the entire market in the following three years. Companies that cut dividends saw stock prices rise only 1.4 percentage points over the overall market in the same time period." (Moneypaper, March.)

"In only two of the last 11 years has the average S&P 500 stock beat the index as a whole." (Forbes.)

"Individuals' municipal bond holdings fell sharply in the past four years. With demand for 'munis' down, these bonds are cheap." (Investor's Business Daily.)

Pub Date: 3/13/98

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