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									Thursday Complexity Post August 3, 2006

         Boomers Face Unprecedented Risk and Uncertainty
Baby Boomers, the 77 million Americans born between 1946 and 1964, face old-age
insecurities and economic peril that previous generations have never confronted.

“Research shows that boomers, on average, are about at the same position financially
as previous generations,” says Olivia Mitchell, a Wharton professor of insurance and
risk management. “However, they face must greater uncertainty. For example, my
parents’ generation had Social Security to look forward to. …today…Social Security
is running short of financing. My parents; generation benefited from a huge run-up in
the value of their houses. What we don’t know looking forward, is, how secure is that

“The risks are greater, and the uncertainties are terrific,” Dr. Mitchell says. “”The
capital markets are much more globally integrated, and more volatile. And therefore,
baby boomers really have a very great challenge facing them, quite distinct from what
their precursor generations confronted.”

Dr. Mitchell and Christopher “Kip” Condron, president and CEO of AXA
Financial, the world’s largest financial services firm, in a provocative discussion
with Knowledge at Wharton. assert young boomers need to save more and most will
need to work well beyond the traditional retirement age of 65. Mr. Condon notes that
the idea of retiring at age 65 came about 100 years ago from Benjamin Disraeli,
because 65 was the life expectancy then. According to 2000 data, he says, if a couple
reaches age 65, there is a 62 percent probability that one partner will live past 90. In
1970, that probability was 40 percent. Longer lives are not an unmixed blessing. They
mean greater probability of incurring high health care costs, and greater likelihood that
retirement savings won’t stretch far enough. Both note that while many Americans
own homes that could aid financial survival in old age, financial service companies are
still working to perfect the design of reverse mortgages that could allow them to stay
in their homes and tap them as a major asset. But that’s not a panacea.

A story in U.S. News by Paul J. Lim notes that low mortgage rates and surging home
values have induced Americans to refinance their homes in droves—which means
many will be entering retirement age with years of payments ahead of them. If they
refinanced to renovate, they probably will have even larger payments late in life. The
same story quotes a Merrill Lynch survey that only 17 percent of boomers want to
retire for good, and it may be fortunate that fewer people have that desire.

Analysts note Boomers must cope with massive social changes in the nature and
structure of employment, changed attitudes about work and leisure, the decline of
defined benefit pension plans, and global changes that have local effect. Some public
policies aim to stretch resources. Eligibility for full Social Security benefits has been
raised from sage 65 to age 67.for younger workers. One element in the pension
overhaul passed by the House of Representatives last week would let employers
automatically shift some of their employees pay into retirement savings plans. While
that could hurt low-income workers, many experts say long-term benefits outweigh
the pain. .

The Commerce Department’s Bureau of Economic Analysis reported last week that
US personal savings rate dropped to zero in June. A story by Kathleen Pender in
the San Francisco Chronicle quotes economists who say we shouldn’t worry much
about that, and others who suggest we are in big trouble. On broad scale, this report
says, savings provide the capital companies need to build plants, buy equipment and
employ people. Because US companies haven’t been able to finance all their
investment needs with their own earnings, they have had to borrow from other
countries, particularly in Asia, where savings rates are high. That means returns on
American capital will be paid to foreign creditors, a large scale economic risk.

Disposable income is the amount of income a person doesn’t spend and doesn’t have
to pay in taxes. Savings rate is expressed as a percentage of disposable income. The
rate has been falling for decades. It was 10.8 percent in 1984. But even those who
save face an unpredictable future. How can people estimate the impact of inflation 30
years hence? What happens if they lose their physical or mental health? Will a large
segment of the population live to be extremely old, and what changes will that bring ?
The experts are sill working on these questions.

Don’t Forget PlexusCalls
August 25, 2006. 1PM to 2 PM ET
How Complexity Principles Align With Management
563-843-5600, access code 716551 followed by #

Guests: Marc Narkus-Kramer, Henri Lipmanowicz, Lisa Kimball

Marc Narkus-Kramer            has spent the last 20 years working on air traffic control
modernization with the MITRE Corporation’s Center for Advanced Aviation System
Development (CAASD) based in MacLean, Virginia. MITRE is a non-profit corporation
working in the public interest in partnership with government clients. It addresses issues of cal
national importance, combining systems engineering and information technology to develop e
solutions. Mr. Narkus-Kramer is now National Airspace System Architect with responsibility
for integrating the work program across MITRE/CAASD. He was previously responsible for
managing a $6 million dollar project related to modernizing the air traffic control system. He
has been involved in several management transformational activities in his organization and
the aviation community Henri Lipmanowicz retired after a distinguished career at Merck,
where he was president of the Merck Intercontinental and Japan Division and a member of the
Management Committee. He is a student of complexity, one of the founders of Plexus Institute
and serves as Chair of Institute’s Board of Trustees. 2000. Lisa Kimball, PhD, is executive
producer and owner of Group Jazz, an organization devoted to supporting the efforts of teams
task forces, communities and organizations. She earned her doctorate in educational
psychology, cognition and learning and is active in on line community work, organizational
development and is skilled in using complexity-inspired principles. She is also a Plexus

Plexus Institute, The Olde Mill,           …fostering the health of individuals,
P.O. Box 395, 42 South Main Street,       families, communities, organizations,
Allentown, New Jersey, 08501            and our natural environment by helping
Phone: 609-208-2930 Fax: 609-208-2934   people use concepts emerging from the
Email:                       new science of complexity

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