Peak retirement
by Kurt Cobb
As members of America's baby boom generation come to retirement age, they are experiencing an unwelcome confluence of events that is already causing many to postpone or scale down plans for retirement. The swoon in the world's stock markets, the crash in housing prices, low interest rates that reduce income from savings accounts and CDs, and rising costs for basic necessities such as food and fuel are all bedeviling current and would-be retirees.
In the past these circumstances have been viewed as temporary problems that would pass with the inevitable turn of economic cycles. But with the evidence for a nearby peak in world oil production growing--see David Cohen's excellent piece "Peak Oil is a Done Deal" which suggests a peak around 2011--it's possible that many of the adverse circumstances now beleaguering existing and would-be retirees will become long-term fixtures of the economic landscape. In short, we may be seeing peak retirement as those who are expected to retire in coming years find it increasingly difficult to do so.
Let's examine those adverse circumstances to see why this could be the case. For most people real estate investments really mean the homes that they live in. Of course, the appreciation in home prices until recently has been nothing short of spectacular. But now, real estate prices nearly everywhere in America appear to be in freefall. While the S&P Case-Shiller Home Price Index indicates a decline of about 14 percent nationwide in the last year, some the hardest hit areas are those with high concentrations of retirees such as Phoenix (-18.8%), Las Vegas (-22%), San Diego (-26%), West Palm Beach, Fla. (-32%) and Cape Coral, Fla. (-35%).
Perhaps most at risk are homes built in the outer ring suburbs or in the middle of cornfields which are the furthest from retail or employment centers. An oil peak implies continuing high energy prices that will make such homes less and less attractive over time as the cost of commuting to work and to retail centers explodes. And, no matter where one lives, those high energy prices will add substantially to maintaining a home as both heating and cooling costs rise.
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