It’s storm season. And the conditions are perfect for a serious storm, but not the kind of storm you might imagine. As professional services providers, we all need to be prepared for this impending storm and the impact it could have on our clients.

I want you to imagine that you work at a lunch counter. This is a special lunch counter, in that everyone who shows up must be served a lunch. You cannot refuse service to anyone. On a typical day at lunchtime, there are a few dozen people milling about outside waiting for you to open the doors. Suppose you show up for work one day, and there are 12,000 people in line waiting for their lunch. You scramble to feed them all. The next day, those same 12,000 people arrive, but another 12,000 arrive with them. The third day, all 24,000 show up again, and another 12,000 are behind them. Imagine this pattern continues every day for 18 straight years. How will you feed them all?

This is the perfect storm.

Over the past few years, there has been a confluence of events that no one predicted – that no one saw coming. Taken alone, these independent events may be mildly worrisome, and I doubt anyone is losing sleep over them. But, the way these events will interact with each other, will dramatically impact the future.

The trends:

  • 12,000 people are, on average, reaching retirement age every day.
  • This group of people will, on average, live longer than anyone in human history before them.
  • They will require quality healthcare during their retired lives, the cost of which increases each year.
  • Government and social services for this group are already under significant strain, even before the bulk of them qualify for benefits.
  • Corporate employers are shifting the burden for retirement savings onto the worker, and for many of them, it may be too late to comfortably accept the burden.
  • The savings and personal investment accounts of most Boomers are woefully under funded if they exist at all and will likely not support a 30-year retirement.
  • Many people do not have the education or experience to successfully manage their own financial futures.
  • People generally expect their future to look like their recollection of the past, and many underestimate how long they will live.

At best, this confluence of events is unsettling. Why is it we haven’t considered these challenges as a group and addressed them before? Because these facts typically come to us one by one through the media. We read a headline one day about Medicare challenges, and the next day about a large company freezing their pension plan. No relation. It’s not the media’s job to connect the dots. As a result, we generally dismiss these events as noise. But, when one assembles these events into a cause and effect structure, the outcomes are worrisome at best, and more likely, the perfect formula for a national crisis.

First, we learned that the largest segment of the U.S. population – 79 million of them – are beginning to retire and will do so over the next 25 years, essentially crossing this threshold together. We also learned that they are living much longer than any generation before them. Then, the facts teach us that this demographic shift is already stressing our government and social services programs and pension plans to their limits, and we’ve just gotten started. On January 1st, 2008, the first 12,000 baby boomers turned 62, qualifying for Social Security benefits. And 12,000 more will turn 62—every single day—for the next 18 consecutive years. It also means that 12,000 people will qualify for Medicare benefits every day, for 18 straight years. And, they will consume a record amount of healthcare services.

Regarding the government’s ability to support both Social Security and Medicare benefits for future recipients, there is little disagreement on the plausible solutions.

Now, were this news not bad enough, we also learned that a diminishing number of people will be able to depend upon pensions to support themselves. And few members of this generation have adequate personal savings and investments for retirement, which will increase their reliance on the already overburdened government and social service infrastructure.

Lastly and most tragically, we learned that by nature, people tend to project their past experience into the future. Most appear to be blissfully unaware that all the elements of the perfect storm are converging in the next few years to disrupt their retirement life.

So how did the financial pundits fail to predict this storm and how will today’s retirees weather it? As with any storm, there’s a lot of clean up that has to happen. Most people spend more time planning their retirement celebration than they do planning for their retirement. At this point, the smartest investment anyone planning to retire can make is an investment in time – time to sit down with a their team of financial professionals and create a plan. The cost of sound counsel and advice can be much cheaper than the cost of unguided mistakes that compromise a much-anticipated retirement.