About 40 years ago, they were told to cut their hair and find a real job. Today, this same massive segment of the American population, better known as baby boomers, is getting another ultimatum: Stop spending so much money and work even longer at that real job.

Oh, and while you're at it, get a reverse mortgage - if you're lucky enough to still own a home - because someone's going to have to pay for your exorbitant long-term health care.

This shape-up-because-you're-not-shipping-out-anytime-soon message was hammered home by Alicia Munnell, director of the Center for Retirement Research at Boston College, during a keynote address at the OneVoice 2011: FSI Dealer-Broker Conference.

The economic and social ramifications of an aging population that's living longer (women, on average, 3.5 years longer than they did in 1990; men, 1.5 years), retiring earlier, saving less and absorbing much higher healthcare costs is taking its toll not only on older people, but the overall economy and younger workers who will do most of the heavy lifting as the population ages.

Throw in the fiscal meltdowns that accompanied the housing market implosion, Sept. 11, and this latest Great Recession and it's easy to see why Munnell and other economists and retirement pundits are gnashing their teeth and pleading with boomers and policymakers to take some responsible, corrective measures before this situation becomes untenable.

"We have needs increasing, early retirement and rising health care," Munnell told attendees. "The whole system is contracting. Social Security is producing less and people make too many mistakes and don't save on their own."

"And this," she added, "was before the financial crisis." The tonic, according to Munnell, is an old refrain that somehow still hasn't caught on with baby boomers, who should be older and wiser, much less the Gen X and Gen Y sets.

"People need to work longer," she said. "It reduces spending, extends 401(k) and other pension and defined contribution plans, and gives people a much higher annuity from their Social Security insurance."

However, one of the problems with working longer, beyond most people's inherent distaste for the prospect, is that companies have historically been less likely to hire and invest in older employees because they don't know how long they'll be around to see any return on their investment.

It doesn't help that most companies of all sizes have - and some still continue to - cut their headcount across the board in the wake of the economic tsunami that gripped the country for the better part of the last four years.

"[Boomers] flooded back into the labor market between 2007 and 2009," Munnell said. "When this happened, there was a dramatic increase in the unemployment rate for workers 55 years and older. The confluence of the economy depleting retirement benefits and forcing more of these people into the workforce resulted in even higher unemployment rates for younger workers."

And while boomers may have been aghast at how quickly the value of all their stocks, mutual funds and other assets - particularly their homes - retreated, they actually have it much better today and into the future than younger folks.

"Boomers actually look better than other groups because they enjoyed high market returns for years, even though they've also endured some big corrections," she said.

Munnell said the average 401(k) investor who was 30 years old in 1979 has enjoyed a 9.9% run-up, despite the dot-com and housing bubbles. A 30 year old who invested in a 401(k) in 1989 has only realized a 6.6% gain and the poor youngster who started contributing in 1999 at 30 has only seen a 2.8% improvement.

In other words, much of this doom and gloom and uncertainty falls in the lap of the now suddenly motivated boomers themselves.

And scared they are. According to a survey of 1,300 baby boomers commissioned by the Center for Retirement Research shortly after the stock market plummeted 49% between October 2007 and March 2009, 26% of respondents said the ensuing fiscal distress was "as bad" or "worse" than the emotional tumult they experienced immediately after the Sept. 11 attacks.

Meanwhile, in this same general timeframe, housing prices tumbled 31%, unemployment surged to between 9% and 10% and, perhaps most damaging of all, boomers were given the option to begin tapping Social Security benefits at age 62 - locking them into a significantly lower fixed income for the rest of their lives.

"The only good thing about this was that at least there was some place for these people to get some income," Munnell said.

As if this all weren't depressing enough, Munnell and the Center for Retirement Research established something called the National Retirement Risk Index, a device she described as a mechanism to quantify the retirement-readiness of baby boomers that factored in the projected - and optimistic - value of income, assets and other investments accumulated over 30 years versus the expected costs of an extended and more costly retirement.

Munnell said the calculations determined that the overall risk that people of all ages would not be prepared for a comfortable retirement rose from 44% to 51%, and among baby boomers alone jumped 4%.

Besides working longer and saving more, Munnell said policymakers, investment advisers and boomers themselves need to make more use of the retirement assets they have.

Most notably, she advocates reverse mortgages and annuities that she concedes "most people hate" and, in the case of reverse mortgages, the numbers (only 2% of eligible homeowners opt for one) confirm this emotional, if impractical, attachment to their homes.

Finally, Munnell said companies and the government need to make enrollment in available 401(k) programs automatic - only 56% of large programs do now - and encourage or create yet another retirement savings tier beyond Social Security, pensions, IRAs and personal savings to make retirement feasible for everyone.

"But there really is no free lunch," she said. "It's going to cost, and it's something that needs to happen sooner than later.

Larry Barrett writes for Financial Planning, a SourceMedia publication.

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