By DAVID MOON, Moon Capital Management
A couple of weeks ago, I visited with two brothers and their 79 year-old
mother. They were trying to take care of any potential "dangling
participles" with respect to planning and family matters. This is not
uncommon; people often review wills and the titling of assets when they look at
But what was different about this family, however, is that the brothers had
hired a local business, Comfort Keepers, to check in on their mom each day, help
with laundry and make sure that there was always food in the house. When I
tiptoed around the question of why the brothers hired someone to do what are
traditionally "son-like" chores, the mother explained that they lived in three
different cities and all of them were too stubborn to move any closer to one
another. She also pointed out that "her boys" couldn't do laundry as
youngsters and she did not imagine things were any different now.
She did not want them anywhere near her clothes. I proceeded to the next
The meeting made me realize, however, that the solvency of Social Security is
not the only issue to result from the aging of the baby boom generation.
There are a number of other social security (lower case "s") issues that more
families will be forced to face.
Our seniors are the fastest growing segment of the US population. The
"oldest of the old," folks age 85 years-old and older, are growing fastest of
all. From 1960 to 1994, the "over 85ers" grew by 274 percent, compared to
only a 100 percent increase in the entire elderly population. (The US
Census Bureau calls anyone over 65 "elderly." Complain to your
Congressman, not me.) The overall US population increased only 45 percent
in that time. By 2050, the Census Bureau expects this oldest age group
(over 85) to be 5 percent of the entire US population.
The implications are many. Obviously, there will be fewer workers
paying for more retirees' Social Security benefits, putting an unbearable strain
(unless there are changes) on that system. We hear about this problem
almost weekly. But consider the other implications. Reverse
compounding will be a problem. We all know the enormous amount of wealth a
person can accumulate if she starts saving early enough and allow compound
interest to work during her saving years. However, during the spending
years (retirement), the opposite effect occurs. If an individual spends
more than her investment earnings, the spending increases caused by inflation
can soon erode a fixed income portfolio. In 1950, life expectancy in the
U.S. was 68 years; normal retirement age was 65. Fifty years ago, retirees
hardly needed to consider investing for growth, since inflation was less of a
problem during a shorter retirement. Today's retirees can expect to live
another 20 years or so, increasing their need for growth-type vehicles during
their more lengthy retirement years. This is a new phenomenon.
As populations become more mobile and we rely more on technological rather
than physical presence, families are more likely to live apart as they age. The
odds of retired parents living in a city away from one or more of their grown
children are greater today than ever before. The assisted living industry
blossomed in response to the need for a level of 'senior attention' well below
the care afforded in a nursing home, but above the capacity of an employed adult
child. And like the mother with little confidence in her sons' ability to
operate a washing machine, a parent may prefer that some tasks not be performed
by a family member. (Particularly those who, like me, are
The political implications are already obvious; the AARP is a powerful
lobby. Since politicians are adept at bribing people with their own money,
more public resources are likely to find their way to this growing, and often
But the biggest challenge may be neither political or financial; it may
be about who is going to do mom's laundry.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).